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A Case Study on:

Presented by:Jay Shah,FMS-B,The M.S.U of Baroda.

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INDUSTRY ANALYSIS

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Industry Features:

• 1st in global jute production.

• 7 Million Tones of FBP in 2013-14.

• 63% of the world’s market share in textiles and garments.

• 2nd largest textile manufacturer in the world.

• 2nd largest producer of silk and cotton.

• 24% of the world’s spindles.

• 8% of the world’s rotors.

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Industry Boundaries:

Strengths

• Vast textile production capacity• Large pool of skilled and cheap work force • Entrepreneurial skills • Efficient multi-fiber raw material manufacturing capacity• Large domestic market• Enormous export potential• Very low import content• Flexible textile manufacturing systems

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Weaknesses

• Increased global competition in the post 2005 trade regime under WTO.

• Imports of cheap textiles from other Asian neighbors.

• Use of outdated manufacturing technology.

• Poor supply chain management.

• Huge unorganized and decentralized sector.

• High production cost with respect to other Asian competitors.

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Industry Environment:

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The industry is fragmented.

The industry is emerging as export business expands.

Started to reach the stage of maturity.

Global business scope increasing.

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Industry Structure:

Around 5 major players dominating the industry.

A market situation of perfect competition.

Product differentiation strategy used to attract the customers.

Very little entry and exit barriers.

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Industry Performance:

• The sector contributes 14% to industrial production, 4% to India’s GDP and constitutes 13% of the country’s export earnings.

• With over 45 Million people, employed directly, the industry is one of the largest sources of employment generation in the country.

• The domestic textile and apparel industry in India is estimated to reach USD 100 Billion by 2016-17 from USD 67 Billion in 2013-14.

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• Exports in textiles and apparel from India are expected to increase to USD 65 Billion by 2016-17 from USD 40 Billion in 2013-14.

• The total fabric production in India is expected to grow to 112 Billion square meters by 2016-17 from 64 Billion square meters in 2013-14.

• India’s fiber production in 2013-14 is 7 Million Tones and is expected to reach 10 Million Tones in 2016-17.

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Industry Attractiveness:

•The Indian textile industry accounts for about 24% of the world’s spindle capacity and 8% of global rotor capacity.

•India has the highest loom capacity (including hand looms) with 63% of the world’s market share.

•India accounts for about 14% of the world’s production of textile fiber and yarn and is the largest producer of jute and the second largest producer of silk and cotton.

•A strong production base of a wide range of fiber/yarn from natural fibers like cotton/jute, silk and wool to synthetic/man-made fibers like polyester, viscose, nylon and acrylic.

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• Increased penetration of organized retail, favorable demographics and rising income levels to drive textile demand.

• India enjoys a comparative advantage in terms of skilled manpower and cost of production over major textile producers.

• Abundant raw material and increasing demand for exports to boost fiber production.

• Abundant availability of raw materials such as cotton, wool, silk and jute.

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• Entire value chain of synthetics.

• Value added and specialty fabrics.

• Fabric processing set-ups for all kind of natural and synthetic textiles.

• Technical textiles.

• Garments.

• Retail brands.

Industry Prospects for future:

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COMPETITIVE ANALYSIS

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Major Competitors of Arvind:

Raymond

S.Kumar

Welspun

MafatlalIndustries

Aditya BirlaGrasim

Alok Industries

Ashima Industries

Bombay Dyeing

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5 Force Analysis:

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Threat of New Entrants- HIGH

a) Favorable policies by Govt.

b) Less entry & exit barriers.

c) Insignificant capital investment.

d) Unorganized and poor labor.

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Threat of Substitutes- LOW

a) No direct threat.

b) Competition with other semi-durable goods.

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Bargaining Power of Buyers- HIGH

a) Consumers demanding better quality fabric.

b) Sophistication and customization needed.

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Bargaining Power of Suppliers- HIGH

a) Powerful groups of cotton suppliers.

b) Cost of power, labor, and cost continues to increase.

c) Demand remunerative cotton prices.

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Competitive rivalry in an industry- HIGH

a) Strong competition from domestic players.

b) Gradual increase in competition from global players.

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Critical Success Factors For Arvind Mills:

Probability of Impact Impact on business

High Medium Low

High

Medium

Low

Scale of operations, brand strength and reach,Economic.

Socio-cultural,International

Integrated supply chain,Regulatory

Technological

-

- -

-

-

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COMPANY ANALYSIS

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Name: Arvind Limited

Type: Public company (NSE, BSE 500101)

Industry: Textile

Founded: 1931

Headquarters: Ahmedabad

Products: Denims, Knits, Khakhis

Employees: 26000+

Website: www.arvindmills.com

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Corporate Mission & Values:

Then:‘To Achieve Global Dominance in Select Business Built Around Our Core Competencies, Through Continuous Products and Technical Innovation, Customer Orientation, and a Focus on Cost Effectiveness’

Now:‘We will enable people to experience a better quality of life by providing enriching and inspiring lifestyle solutions’

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WE BELIEVEIn people and their unlimited potential; in content and in focus on problem solving; in teams for effective performance, in the power of the intellect.

WE ENDEAVOURTo select, train and coach people to obtain higher responsibilities; to nurture talent, and to build leaders for the corporations of tomorrow; to reward, celebrate and activate all intellectual business contributions.

WE DREAMOf excellence in all endeavors; of mutual benefit and prosperity; of making the world a better place to live in.

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Domestic Brands

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International Brands

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1931Laid the foundation of Arvind Mills raising a share capital of Rs. 25.25 lakh, Shri. Kasturbhai Lalbhai, Shri. Chimanbhai Lalbhai, and Shri. Narottambhai Lalbhai

1939 Diversification with Anil Starch Limited followed by Atul Products Limited in 1952 for producing textile-related chemicals and dyestuff

1985-86 Sanjay Lalbhai led the ‘Reno-vision’ Commission and implemented first Denim plant and issued debentures

Milestones:

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1987-88 Arvind enters the export market for Denims with an export oriented unit named Arvind Exports

1990 Nagri Mills acquired and renamed as Arvind Intex Ltd and Saraspur Mills renamed as Arvind Poly coat

1996 Set up Arvind Cotspin Ltd., an export oriented unit at Kolhapur, Maharashtra

2000 Garments Exports Division ‘Lifestyle Apparels’ established

2003-04 Arvind Brands Limited made subsidiary company of Arvind

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2007 Started Organic farming with Fairtrade Cotton Project

2008 Arvind expands its presence in the brands and retail segment by establishing MegaMart – One of India’s largest value retail chains.

2010 Launched The Arvind Store

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Reno-vision of 1980’s:

Segmentation• Cotton segment• Natural fabrics• Denims (less

dependant on fashion changes)

Targeting• Global customers• International

markets

Positioning• High-quality

producer• Premium products

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Outcomes of Reno-vision:

A high quality product was created Targeted both the genders Tightened the entry barriers Captured more market globally Developed technical competence Made competition irrelevant Took advantage of availability of long-staple cotton fiber Extension of its product-line Captured rapidly emerging market

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Omni-channel retail brand: Creyate

Omni-channel brand which means it is both online and offline

Using E-commerce to sell personalized clothing

3D visualization software

Delivers your garment in 12 days at your doorstep

Products may be more expensive by 15-20 per cent

Pilot the concept in the top 15-20 cities initially

To enter US, UK, Germany and Japan

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Financial Performance

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ENVIRONMENTAL THREATS AND

OPPORTUNITY PROFILE (ETOP)

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Various facets of environment:

Technological Environment

Market Environment

Economic Environment

Regulatory Environment

International Environment

Socio-Cultural Environment

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a) Mills with obsolete and old machinery.b) Spinning and weaving became two different split operations

which disturbed the integrated plants.c) Spinning being the capital intensive part was handled by the

automatic mills.d) Labor intensive component outsourced by textile companies.e) International markets with remarkable, sophisticated ,

electronically controlled textile machineries. f) The technology ensured good quality product with minimum

labor input.

Technological Environment:

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Economic Environment:

a) Textiles comprised 33% of India exports.b) India had the largest area under cotton cultivation i.e. 24%.c) India had the lowest textile yield (12%) of global production.d) Low wage structure prevailed e) Poor I.R relations resulting into long strikes f) Mounting deficit in budget.g) Weaker Indian currency.

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Regulatory Environment:

a) Government controlled inputs like power, coal, freight, etc. �b) High indirect taxes, excise duty.c) Import of capital goods was controlled by rigid licensing

and high import tariffs.

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Market Environment:

DOMESTIC MARKET ENVIRONMENT

• Protected domestic market.• The products of Arvind Mills were of local standards.• Lower end market was dominated by power looms. • While Upper end market was dominated by major mills and spinning mills set up as 100% EOUs.

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CONSUMER DEMANDThe consumer in the household sector demanded better quality fabric.�

TRADE CHANNELSThe trade channel comprised of agents and wholesalers which were very slow to change and continued to demand conventional products.These trade channels held a very powerful position in the textile distribution.

�EMERGING COMPETITIVE DOMESTIC MARKETSThe power loom sector had less entry and exit barriers.Very less capital investment required. �Labor was unorganized and poor.

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International Environment:

Third largest denim producer in the world �

Low cost of domestically produced cotton �

Low cost of labor and weak currency

Textile is an International or Global Industry

The Company has got Global opportunities� �

Mergers and Acquisitions abroad �

Produced high quality product

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Socio-Cultural Environment:

Variety of Economic levels, Social status, Cultural group �

India being 2nd largest populated country

Co-existence of poor and middle class

Change in consumers tastes and preferences towards western�

Larger portion is young population so denim is favorable� Increasing shopping habits specially of women

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STRATEGIC ADVANTAGE PROFILE (SAP)

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Marketing capability factors could be segregated into four basics categories:

Marketing Capability Factors:

Price

PlacePromotion

Product

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Product

• Unisex leisure/fashion fabric both for international and domestic market• High quality fabric for men’s formal shirts and bottom • Fashion fabric for women primarily for domestic women• Readymade garments for men-shirts and jeans• Wide range of textile products and brands

Price�

• Lower prices in comparison to the competitors due to the availability of low cost domestic cotton and labor

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�Place

•Entered the global market•Selling now in both local and global markets

Promotion

•Creating awareness and creating customer orientation•Focused on encouraging awareness of denim and high premium garmentsGoal of developing long term trusting relationship with customers

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Financial Capability Factors:

Major changes in financial strategy from 1987-88 �

For modernization Company went for large borrowings in 1988 �

Again in 1991 the Company changed to equity financing �

Growth and potential of the company attracted FIIs

Large fund mobilization through capital market �

Readiness of domestic investor to invest as well

Received long term loan from ICIC�

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Operational Capability Factors:

1. Production System �2. Operation and Control System �3. R & D System

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Production System:

a) The capacity of Arvind Mills was 70 million meters/annum.b) Features of Production: •Automatic spreading and cutting. •Automatic patterns sewing machine for cuffs and collars. •Automatic collar and cuff making machine. •Automated conveyor system in finishing areas to minimize handling of finishing garments.

Arvind Mills works on technologies such as Open-end Spinning, Foam Finishing, Mercerizing, Slasher-dyeing, Rope-dyeing, Air-Jet, Projectile and Wet Finishing.

To further meet customer needs, Arvind Mills has also introduced a new dyeing and processing method for denims.

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Operations and Control System:

• Arvind Mills has done many technical collaborations.• The company has followed a disciplined strategy of improved product and customer mix.• Increased capacity utilization.• Control on sourcing of cotton and other raw materials to reduce procurement costs.

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R & D System:

• Arvind Mills has a strong Research and Development focus on process improvement, cost reduction and new product development.

• Introduced brand “Ruf & Tuf” with the concept of ready to stitch jeans.

• Newport brand was also made available at low price.

• Arvind Mills produces more than 50 varieties of denims for international customers.

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Personal Capability Factors:

Recruitment from premier management and technological institutes. Arvind Mills resourced management talent from diverse backgrounds. The delayerisation and flattening of the management structure had been carried out to enable employees get early substantive responsibility.

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Information Capability Factors:

Advanced Production Management software and Advanced Industrial Engineering software.

Each sewing machine would have a data center which would be used to record critical parameters like Online production, machine stoppages due to problems in sewing, problems in machines etc.

Such system ensures a strong control over production and ensures a quick turn around apart from a high quality level.

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General Management Capability Factors:

• Inspiring lifestyle solutions

• Successful takeover of failed firms (Nagri Mills) & rejuvenating them with a new purpose

• Conversion of non performing assets into productive resources

• Establishing Arvind Mills as global company

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SWOT Analysis

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Strengths:

Strong portfolio of domestic and international brands

Economies of scale through complete integration

Latest manufacturing tools and technologies

Wide geographical presence around the globe

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Weaknesses:

Lack of innovative and fresh ideas

Presence spread in only big cities

Not doing enough to build brand equity

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Opportunities:

Changing retail scenario

Rapid growth in age group of 15-44 years

Ability and willingness to spend in India consumers

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Threats:

Competitors like Raymond, Bombay Dyeing, Madura Garments, Welspun, Aditya Birla Grasim, etc

Cheap imports from China, Thailand, Bangladesh

Government’s regulatory and business policies

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Questions and Answers

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Thank You!jayshah316@gmail.com