Dirk Willem te Velde (Principal Research Fellow, ODI)
15 June 2018
The production of footballs, tennis balls, table tennis balls, golf balls and baseballs is highly concentrated in a few countries. However, much production is frequently subject to disruptive change, which involves opportunities – and challenges – in relation to attracting manufacturing production. Understanding how change happens and how it is managed is crucial for those wanting to transform their economy. This blog discusses geographical location in the production of balls, the influence of disruptive change on this and the lessons it offers for managing transformation.
Concentration of production
The 2018 Football World Cup started in Russia this week but not everyone will know that all footballs used at the World Cup have been produced in the city of Sialkot, near the border between Pakistan and India. One Pakistani company, Forward Sports, is the core provider of footballs to this World Cup, producing some 700,000 balls per month and employing 3,000 workers, of whom 900 are women.
Sialkot gained an international brand name in the 1980s when it produced the Tango Ball for the Football World Cup in 1982. Major international brands such as Adidas, Nike, Puma, Umbro, Diadora and others have sourced their supply of footballs from this export-oriented cluster. Pakistan currently earns an annual $1bn from sports goods exports, which includes $350mn–$500mn from footballs, or 10% of Pakistani exports, creating some 200,000 jobs. Around 60-70% of the world’s hand-stitched footballs, or between 40mn and 60mn per year, are made here.
Such significant concentration has also been a factor in the production of table tennis balls for more than a century. Halex used to be the world’s biggest manufacturer, with almost every single table tennis ball in the world made in Highams Park in London.
A similar level of concentration applies to the production of tennis balls. Slazenger Dunlop, a leading UK manufacturer, produces 300mn tennis balls per year, worth nearly £200mn (a fifth of its turnover). Previously produced in the UK, the tennis balls for the Wimbledon tournament have since 2002 come from the special economic zone in Bataan in the Philippines. Before the finished product reaches the UK, inputs come from the US (clay), Greece (silica), Malaysia (rubber), New Zealand (wool) and the UK (felt), with processing taking place in Bataan. A ball travels 50,000 miles, through 11 countries.
A differential picture is thrown up by the production of golf balls and baseballs for US consumption. Some 1.2bn golf balls are produced each year in what is a capital-intensive process, mainly in the US. Companies such as Spalding and Titleist have traditionally dominated production, which has involved significant research activities and creation of patents. Some 40% of the production of golf balls for the US is carried out in New Bedford, Massachusetts. Baseballs, on the other hand, have remained labour-intensive. Rawlings has had an exclusive contract to supply the major leagues with baseballs since 1977. A plant in Costa Rica produces 2.2mn balls a year, worth around $35mn.
Production of sports balls is highly concentrated and it is difficult, but not impossible for poor countries to enter this market.
Managing disruptive change
Disruptive change has had a major impact on the manufacturing of balls. Allegations of child labour and then a change in regulations requiring a move from hand-stitched to machine-stitched footballs have had major implications. The share of Pakistan in football production dropped significantly between 2006 and 2010 (see chart below) in part because orders from Nike to Sialkot were dropped, with the Football World Cup in 2010 sourcing Adidas Jabulani footballs from China. Only after the manufacturers invested in equipment and skills and introduced machine-stitched footballs did Sialkot regain its status as supplier for the 2014 World Cup and again for the 2018 World Cup. The cluster is supported by private infrastructure (e.g. airports) and streamlined border procedures.
Disruptive change in the production of footballs
Changes in the production of raw materials led to the end of table tennis ball production in London. Celluloid balls replaced rubber and cork ones in 1900, but by the 1990s celluloid was being produced only to make table tennis balls. It rapidly became an obsolete material when it was replaced by plastic in most applications except for the production of table tennis balls. Demand for the material decreased and celluloid production ceased in Europe as it became too costly. This left only two Chinese factories producing celluloid, solely for table tennis balls, a material which remained flammable and difficult to transport. In 2014, producers began working with the International Table Tennis Federation to move towards production of plastic balls. This is now dominated by two plastic tennis ball producers in China and one in Germany and in Japan, fighting for official recognition.
Political changes led to the production of baseballs moving from Haiti to Costa Rica. Rawlings came to Costa Rica after a 1986 coup deposed the dictator Jean-Claude Duvalier. Production is still based on hand-stitching, despite efforts as early as 1949 to move to machine-stitching. Production of Wimbledon tennis balls took place in Barnsley for a hundred years until 2002 when the factory moved its equipment to the Philippines because of cost-efficiency reasons.
All this shows that changes can be disruptive (whether for regulatory or economic reasons), relocating all or most of production to other countries. This observation opens up opportunities for other countries that have so far not yet benefitted.
Disruptive change happens and poses major challenges for manufacturing but countries can seize the opportunities by being prepared and working in a targeted way. Pakistan lost market share through a policy change (a change in standards) but then regained the contract to produce World Cup footballs through innovation, supported further by investment in skills and equipment and targeted (privately operated) infrastructure. China used an opportunity presented by a change in the raw material base of table tennis balls, again working with standard setting bodies. Political instability led to the relocation of baseball production from one low-wage location to another (Costa Rica). Some processes, such as the production of golf balls, have remained capital-intensive, located in developed countries (US); meanwhile, baseballs have not caught up yet with mechanisation. But, as disruptive change continues, geographical concentration in the manufacturing of balls may again change considerably in the future (consider e.g. the effects of a change in UK trade policy, or a change in international regulation of say baseballs), offering opportunities for some, challenges for others– and policy and regulation matters for this.
Photo credit: File photo, Ary News