Industry : Textile

Presented By:

Kunal Shah (27)

Birju Shah (25)

Bhoomi Patel (13)

Rubina Pathan (20)

Diana Christain (05)

CONTENTS

Porter’s Diamond Introduction- Arvind Group with PEST analysisCompetitors Analysis –Porter 5 forces

Arvind Ltd- Denim BusinessSWOT/ Strategy Clock

Corporate GovernanceCSR

Recommendation

Overview Textile Industry

New Initiatives

Overview On Textile Industry

Indian Textile Industry and its Global Position • Second largest in the world. • It has the largest cotton acreage (9 million hectares). • Third largest cotton producer. • The largest producer of Jute, the second largest producer of silk and the 5th largest producer of synthetic fiber / yarn.

The Indian Textile Industry within the Indian Economy • The Indian Textile and Apparel industry : contributes to 3.6% of India’s gross domestic product accounts for 25% of India’s exports. •Accounts for about 20% of industrial production. •Employs over 15 million people. •Textiles and Garment exports account for 39% of India’s total exports. •The Indian Textile Industry has great potential, but great challenges ahead. It must maximize its strengths and minimize its weaknesses.

MAJOR MANUFACTURERS AND THEIR MARKET SHARE

Countries and their positive and negative aspects with regard to textiles

Key Countries/ regions

Key Positives Key Negatives

China Efficient, low cost, vertical Integration

Growth at the cost of profits

India, Pakistan Vertical Integration, Low Cost Lacks economies of scale and infrastructure

Mexico (NAFTA) Turkey

Proximity to market, duty and quota free

Lack of china and india degree of competitiveness

ASEAN (Vietnam, Cambodia, Indonesia)

Cheap Labor No other cost or locational advantage

AGOA (African) countries Bangladesh

Quota and tariff free, cheap labor Lack of integration and china and india’s has degree of competitiveness

Hong kong, Korea, Taiwan

Trading hub proximity to china No cost advantage, protected currently by quotas

USA and EU Non-quota barriers likely to prove irritant to import

Huge but choosy market

The Value Chain in Textiles

Porter’s Diamond

Firm Strategy, Structure and Rivalry: Dominated by unorganized sector Highly competitive and fragmented Entry of foreign payers

Factor Condition: Abundant availability of raw material Low cost Flexibility Skilled labor Ability to produce customized apparel lower lead time Government Regulations / Policy: Support for technology Upgradation Government reimburse 5% of the interest rates A credit linked capital subsidy of 10%, in addition to the existing 5%

interest reimbursement for modernizing the processing sector Quality improvement

Porter’s Diamond

Related and supporting Industries: Product Development / DesignCheap and abundant raw materialWell developed Textile machinery IndustryWell developed IT capabilities

Demand Condition: Large domestic Potential Favorable DemographicsGrowing income and purchasing powerGrowth of organized retailing malls

Contd…

History The year 1930 was when the world suffered the

great depression. Companies across the globe began closing down. In UK and in India, the textile industry in particular was in trouble.

At about this time, Mahatma Gandhi championed the Swadeshi Movement and at his call, people from all across India began boycotting fine and superfine fabrics, which had so far been imported from England. In the midst of this depression one family saw opportunity.

The Lalbhais reasoned that the demand for fine

and superfine fabrics still existed. And any Indian company that met this demand would surely prosper. The three brothers, Kasturbhai, Narottambhai and Chimanbhai, decided to set up a mill to produce superfine fabric.

HistoryArvind Limited started with a share capital of Rs 2,525,000 ($55,000) in the year 1931. With the aim of manufacturing the high-end superfine fabrics Arvind invested in very sophisticated technology. It was one of the few companies in those days to start along with spinning and weaving facilities in addition to full-fledged facilities.Steadily producing high quality fabrics, year after year, In the mid 1980’s the textile industry faced another major crisis. With the power loom churning out vast quantities of inexpensive fabric, many large composite mills lost their markets, and were on the verge of closure. Yet that period saw Arvind at its highest level of profitability. The Arvind management coined a new word for it new strategy – Reno vision. It simply meant a new way of looking at issues, of seeing more than the obvious and that became the corporate philosophy.

Introduction

1991Arvind emerges as the third largest manufacturer of denim in the world.1987-88Arvind enters the export market for Denims with a dual focus - Denim for leisure and Denim for fashion wear.1980Arvind records highest levels of profitability. The new strategy – ‘Reno vision’, points at changing the business focus from local to global, towards a high-quality premium niche market.1931The inception of Arvind Mills Limited at the hands of three brothers - Kasturbhai, Narottambhai and Chimanbhai Lalbhai

Introduction

2010Arvind launches The Arvind Store, a concept putting the company’s best fabrics, brands and bespoke styling and tailoring solutions under one roof. Arvind launches its first major Real Estate projects. Arvind becomes one of India’s largest producers of fire protection fabrics.2007Arvind expands its presence in the brands and retail segment by establishing MegaMart – One of India’s largest value retail chains.2005Arvind creates a unique one-stop shop service on a global scale, offering garment packages to reputed national and international customers.1997India’s largest state-of-the-art facility for shirting, gabardine and knits is set up at Santej.

Vision

The underlying theme running across the broad spectrum of all business activities at Arvind is that of enhancing lifestyles of people, across all diversities and demographics. To serve that end, the corporate vision for Arvind states:

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

Philosophy

WE BELIEVE In people and their unlimited potential. In content and focus in problem solving. In teams for effective performance, in intellect & its power. WE ENDEAVOR To select, train and coach people to obtain higher responsibilities. To nurture talent, and to build leaders for tomorrow's corporation. To reward, celebrate and activate all intellectual business contributions. WE DREAM Of excellence in all endeavors. Of mutual benefit and prosperity. Of making the world a better place to live in. We Make Things Happen.

•Enhance innovativeness and change management

capabilities

•Improve capital budgeting and allocation process

•Product portfolio optimization

•Support strategic planning

•To become the market leader

Corporate Strategy

Business Involved

Denim Fabric Woven/Knitting fabric Garment

Arvind Store Mega Mart Agricultural

Engineering Real Estate

PEST Analysis

Political EnvironmentImport of capital goods was controlled by rigid licensing and high import tariffs.Government controlled inputs like power, coal, freight, etc.High indirect taxes, excise duty.

Economic EnvironmentTextiles comprised 33% of India exports.India had the largest area under cotton cultivation

i.e. 24% India had the lowest textile yield(12% of global production)Consumers tastes and preferences are transforming

to westernLarger portion is young population so denim is

favorableIncreasing shopping habits specially of women

Socio-cultural EnvironmentWorld’s largest democracy with 2nd largest Population

Variety ofEconomic levelsSocial statusCultural GroupCo-existence of poor and middle class

TECHNOLOGICAL ENVIRONMENT•STATE OF TECHNOLOGY

–Mills with obsolete and old machinery.–Spinning and weaving became two different split operations ,disturbing the integrated plants.

–Spinning the capital intensive part was handled by the automatic mills

–Labor intensive component outsourced by textile companies.

Environmental Sector Nature of Impact Impact of Each Factor

Market a. Protected Domestic Market. b. Emerging competitive power loom sector.

Technological Indian textile market less advanced technology oriented.

Economical Rupee appreciation.

Regulatory Government controlled inputs, high taxes, controlled import of capital goods.

Political Politics had no great role in the industry

Socio - Cultural 2nd largest population. Transforming consumer preference and shopping habits.

InternationalLow cost of labor.Low cost of productionUnexplored global textile markets.

Major Competitors Of Arvind Brands

PORTER’S FIVE FORCES MODEL

COMPETITIVE RIVALRY

Competitors adopting aggressive growth strategies as well as eyeing top cities

Huge number of competitors

Stiff competition from small town stores and specialty stores

THREAT OF NEW ENTRANTS

Lucrative market for international brands

Low entry barriers in unorganized retail sector

THREAT OF SUBSTITUTES

• Plenty of offerings in premium and super premium category

• Small town stores – proximity, home delivery, personal attention

• Growth in online shopping

BARGAINING POWER OF SUPPLIERS

Increased no of players increases bargaining power of suppliers

Not all companies have complete integration (like Arvind)

BARGAINING POWER OF CUSTOMERS

Low switching costs

Low customer loyalty

Arvind LtdDenim Business

Denim Business at Arvind Ltd

•Denim is a rugged cotton twill textile, in which the weft passes under two or more warp threads. •Denim is unique in its singular connection with one colour. •The warp yarn is traditionally dyed with the blue pigment obtained from indigo dye.• Until the introduction of synthetic dyes, at the end of the 19th century, indigo was the most significant natural dye known to mankind, linked with practical fabrics and work clothing. •Garment processing has grown to a great extent during the past few years. This growth can be attributed mainly to the denim garments, which is the largest garment segment today. •The factors to be considered while processing include the choice of chemicals, production limitations and types of machinery used.

Business level Strategy

• Improve cash management minimize borrowing• Improve collection, reduce receivables• Improve capacity utilization• Increase inventory turns• Improve customer retention and loyalty • Gain / enhance market share• Enable cross sell up sell capabilities• Improve product and customer profitability • Enable and enhance channel partner effectiveness

Functional Level Strategy

• Reduce administration costs• Reduce transaction cost • Reduce logistics cost • Reduce overhead costs• Reduce maintenance costs• Reduce financial costs• Reduce inventory carrying costs• Minimize rejects and returns • Reduce material obsolescence• Reduce out of stock situation

Organization Structure :

MD

CEO

Operation Head

HR Head Production Head Spinning/Weaving Engineering Head Inspection Head Production Head

Finishing

Marketing Head

Logistic Head Design & Development Head

CFO

Finance Head

Section Head Procurement

Section Head Account

SWOT ANALYSIS

Strong portfolio of domestic and international brands

Economies of scale through complete integration

Latest manufacturing tools

Wide geographical presence

STRENGTHS

WEAKNESS

Less productive machines in process

Presence in only big cities

Not doing enough to build brand equity

OPPORTUNITIES Changing retail scenario

Global demand of Denim fabric

THREATSCompetition from global players like

Raymond, Bombay Dyeing, Madura

Garments

Decline in exports

Cheap imports from China, Thailand,

Bangladesh

Rise in raw material price

Arvind Brand Basket

Flying Machine Newport Ruf n Tuf Excalibur

Launched 1980 1993 1997 1995

Age group 15-30 18-28 15-30 18 & Above

Price range 500-1000 300-500 299-699 500-1000

Difficulties faced

Hike in exise to 8%

Hike in exise to 8%

Distribution hurdle

----

Retailer own outlet own outlet Big Bazaar

Brand ambassador

Abhishek Bachchan

Saif Ali Khan Akshay kumar ----

Tag Line Who Needs Phoren?

The Measure of Success

---- ----

International Brands

Arrow Lee Wrangler Tommy Hilfiger

Licensed Cluett, peabody & co., USA

VF corporation VF corporation JV with Murjani group

Age group 27-35 4-14 & 17-25 17-25 &25-40 18 & Above

specifics Four sub brand•Classic•Premium•Urban•Sports

Adjudged the images fashion award “most admired Jeanswear” brand

•Fashion conscious•Love wearing denim on weekend•Retail ambience was given importance

Introduced men’s sportswear, men’s Jeanswear, junior Jeanswear

Why so many brands ?

Aggressive strategy to verticalize its operations.

Vision of largest apparel brands.

To attract different segments by heterogeneous mix.

Facilitate new brand acceptance

Reduce risk perceived by customers

Improve efficiency of marketing.

The strategy clock : Denim Product

4. Differentiation

5. Focused differentiation

6,7,8, strategies destined for ultimate

failure

3. Hybrid

2. Low price

1. ‘no frills’

High

High

Low Price

Perc

eive

d ad

ded

valu

e

Denim

GROWTH STRATEGY

As on 2005, Arvind was in a comfortable position.

Focus on retail------Company want to achieve 80% of its sales through apparel.

Change from Centralization to Decentralization

Clustering of Brands

GROWTH STRATEGY(Cont..)

Globalization Strategy

• Acquiring rights of Reds in North and south America• Exclusive stores in Gulf to showcase its brands

Launching of Spectrumplaza.com

Tie ups with Indiatimes.com and rediff.com

OTHER CONCEPTS

Brand Extension: when different products are manufactured under same brand

name. Ex. Arrow started off as a shirts-only brand then diversified into casuals,

jeans and accessories like belts, wallets etc.

Forward Integration: Arvind Mills, which manufactured fabrics, integrated

vertically forward by launching its in-house brands and retail stores.

Brand Endorsement: associating a popular figure as the brand ambassador to

give the brand a personality and strengthen its positioning ex. Action star

Akshay Kumar was roped in to endorse Ruf n Tuf to give it a tough & rugged

look.

Learning and DevelopmentHR Functions

•Provides ideal opportunities to employees to enhance their technical and professional skills.

Arvind offers various technical, functional and behavioral programs that help employees acquire skills & knowledge needed to elicit excellent performance from their teams.

The various courses covered are key management principles of goal setting, delegation, coaching and developing employees, decision making, handling conflict, managing change and rewarding and recognizing employees.

Regular feedback and rigorous interaction makes the programs effective.

Udaan – is a potential leadership development program where budding leaders are groomed for future roles and responsibilities.Learning & Development believes in creating an environment of learning which shall build up the individual & organization wholly.

BENCHMARKING

Highly Motivated People

Automatic stopError Proofing

In station quality control5 Why

Operational StabilityLeveled production

Standardization of workVisual Management

Best Quality, Lowest Cost, Shortest Lead time, Best safety, High Morale

Right Part, Right Time, Right AmountContinuous flowPull systemIntegrated Logistics

Company’s Philosophy on Corporate Governance is to attain the highest level of transparency, accountability & integrity

The objective extends not merely to meet the statutory requirements but also to go beyond them by putting into place, procedures & systems

It is responsive to aspirations of all the stakeholders-customers, suppliers, lenders, employees, the shareholders & expectation of society

Board of Directors supports the principles of CG

Lays strong emphasis on its trusteeship to role to align & direct the actions of the organization to achieve its avowed objectives

Corporate Governance

Agenda papers are circulated to the board members 4-5 days in advancePossible subjects for meetings:

Annual budgets & updates Capital expenditures & review of their implementation Legal proceeding involving Company Minutes of meetings of various committees Quarterly, half-yearly & annual Results Product-wise business performance Business presentation covering production, raw material, marketing, sales, etc. New projects & joint ventures Sales of materials nature of investments, subsidiaries, assets, etc. which are not in

the normal course of business Performance of subsidiaries Business restructuring

Board Agenda

The Board of Directors has constituted 4 Committees of the Board

Audit CommitteeRemuneration CommitteeInvestors’ Grievance CommitteeManagement Committee

Committees

Audit Committee Oversight of company’s financial reporting process & disclosure of financial

information to ensure that the financial statement is correct, sufficient & credible

Recommending the appointment & removal of external & internal auditors, fixation of audit fees & also approval for payment of any other services

Reviewing with the management , external & internal auditors, the adequacy of internal control systems

Remuneration Committee To frame Company’s policies for compensation & benefits for Executive

Directors To review & recommend compensation payable to the Executive Directors To administer the Employee Stock Option Schemes (ESOS) including framing

of policies related to ESOS & reviewing grant of ESOS To review HR policies & initiatives

Investors’ Grievance Committee To specifically look into the redressal of Investors’ Grievance pertaining to :1. Transfer of shares & debentures2. Dividend, interest & redemption proceeds of debentures3. Dematerialization of shares & debentures4. Replacement of stolen, lost & mutilated share & debenture certificates5. Non receipt of rights, bonus & split share certificates To look into other related issues towards strengthening investors’ relations To consider & approve issuance of share/debenture certificates including

duplicate share/debenture certificates To look into the reasons for any defaults in the payment to the depositors,

debenture holders & creditors

Management Committee The Management Committee’s primary role is to look after the day-to-day

business activity of the Company within Board approved direction/framework The committee meets frequently, as and when need arises to transact matter

within the purview of its terms of reference

Corporate Social Responsibility

SHARDA TRUST

Its objective is to improve the quality of life of urban poor anywhere in India.

Conducted training programs in Practical English and Computer Applications for unemployed youth

Model “Gyanda – fountain of knowledge” ensures completion of education for the municipal school going children Train youth as Sewing Machine Operatives in collaboration with NIFT and organized their placement with Garment manufacturing firms. Upgrade infrastructure of Sanjay Nagar, a slum pocket in Ahmedabad,

LALBHAI RURAL DEVELOPMENT FUND The Trust directly intervenes in the development process at the village level. The present operational area in 16 districts of Gujarat state reaches out to a population of about 25000.

Vocational Programs for rural poor

Upgrading the infrastructure in a rural primary school

Helping the rural poor in improving the yields in their farms

Training Widows for Entrepreneurship

Promoting Biogas

Participation in National Aids Control Program

Recommendation

Vertical integration, diversification and huge capacity setup.

Process innovation and cost player strategy to defend its Foreign Market.

Improving its supply chain and inventory management through further tying up with farmers, usage of ERP system and increase in the plant efficiency with the use of technology .

Alliance with establish brands.Explore the rural market with affordable brands like

Newport .

www.arvindmills.comwww.google.comwww.wikipedia.org

References