For most low-end manufactured products, the firms that own the world-famous brands generally do not do the manufacturing themselves. This is especially true for the clothing industry, in which the famous brands are generally from the developed countries while manufacturing is outsourcing to often little known factories in low-cost, low-wage countries. In these outsourcing destinations, thousands of factories producing similar goods compete on price with each other for the orders from the famous brands, inching out their survival based on the slim margin between revenue and production costs.

Shengzhou, a city of 750,000 in China’s Zhejiang Province, serves as a classic example of these outsourcing destinations. The factory town is unofficially known as the necktie capital of the world because it is the origin of more than ¾ of the neckties sold every year across the globe. In fact, the city is highly dependent on the tie industry, in which 150,000 are employed by tie factories or industries directly connected to tie making.

Yet, the existing structure is becoming increasingly unfavorable for Shengzhou. The rising wage levels and increase in value of the Chinese currency is hurting the exports and making countries like Vietnam and Bangladesh more attractive to Western brands looking for production outsourcing. In Shengzhou, the shrinking orders are slowly downsizing and bankrupting the city’s more than a thousand tie factories.

The survival of the Shengzhou tie industry and other manufacturing towns may depend on renovations involving closer association with the brands they are serving. Shengzhou-based Babei Group, the world’s largest tie maker, is leading the pack. A recent deal that made Babei the only certified producer of Pierre Cardin ties has given the firm a new hope. By advertising its monopolist status with Pierre Cardin, Babei can associate itself with fashion and high quality as it invest in developing its own Babei brand for the domestic market. The company hopes to use the increasing use of ties in China to counter the slumping exports to the West.

At the same time, the tie producers should not simply be content with making designated ties ordered by the clients. Babei, for example, has bought a design studio in Como, Italy, long the world’s center for high-end ties. Babei is hoping to eventually work out of the shadows of Pierre Cardin and other Western clients. It seeks to become an established brand in its own right and a powerful competition for the Western brands by combining Italian innovative tie designs with a strong manufacturing tradition in China. Other outsourcing factories may learn from Babei in moving from behind-the-scenes to respected stardom in the global manufacturing business.