Industry : Textile

Presented By: Kunal Shah (27) Birju Shah (25)

Bhoomi Patel (13)

Rubina Pathan (20) Diana Christain (05)

CONTENTS
Overview Textile Industry Porters Diamond Introduction- Arvind Group with PEST analysis Competitors Analysis Porter 5 forces Arvind Ltd- Denim Business SWOT/ Strategy Clock New Initiatives Corporate Governance CSR Recommendation

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 Indias gross domestic product accounts for 25% of Indias exports. Accounts for about 20% of industrial production. Employs over 15 million people. Textiles and Garment exports account for 39% of Indias 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 China India, Pakistan Mexico (NAFTA) Turkey ASEAN (Vietnam, Cambodia, Indonesia) AGOA (African) countries Bangladesh Hong kong, Korea, Taiwan USA and EU Key Positives Efficient, low cost, vertical Integration Vertical Integration, Low Cost Proximity to market, duty and quota free Cheap Labor Quota and tariff free, cheap labor Key Negatives Growth at the cost of profits Lacks economies of scale and infrastructure Lack of china and india degree of competitiveness No other cost or locational advantage Lack of integration and china and indias has degree of competitiveness No cost advantage, protected currently by quotas Huge but choosy market

Trading hub proximity to china

Non-quota barriers likely to prove irritant to import

The Value Chain in Textiles

Porters Diamond

Porters 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

Related and supporting Industries: Product Development / Design Cheap and abundant raw material Well developed Textile machinery Industry Well developed IT capabilities Demand Condition: Large domestic Potential Favorable Demographics Growing income and purchasing power Growth of organized retailing malls

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.

History
Arvind 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 1980s 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
1991 Arvind emerges as the third largest manufacturer of denim in the world. 1987-88 Arvind enters the export market for Denims with a dual focus - Denim for leisure and Denim for fashion wear. 1980 Arvind 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. 1931 The inception of Arvind Mills Limited at the hands of three brothers - Kasturbhai, Narottambhai and Chimanbhai Lalbhai

Introduction
2010 Arvind launches The Arvind Store, a concept putting the companys best fabrics, brands and bespoke styling and tailoring solutions under one roof. Arvind launches its first major Real Estate projects. Arvind becomes one of Indias largest producers of fire protection fabrics. 2007 Arvind expands its presence in the brands and retail segment by establishing MegaMart One of Indias largest value retail chains. 2005 Arvind creates a unique one-stop shop service on a global scale, offering garment packages to reputed national and international customers. 1997 Indias 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.

Corporate Strategy
Enhance innovativeness and change management

capabilities
Improve capital budgeting and allocation process Product portfolio optimization Support strategic planning To become the market leader

Business Involved

Denim Fabric

Woven/Knitting fabric

Garment

Arvind Store

Mega Mart

Agricultural

Engineering

Real Estate

PEST Analysis
Political Environment

Import 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 Environment
Textiles 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 western Larger portion is young population so denim is favorable Increasing shopping habits specially of women

Socio-cultural Environment
Worlds largest democracy with 2nd largest Population Variety of Economic levels Social status Cultural Group Co-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 Market

Nature of Impact

Impact of Each Factor a. Protected Domestic Market. b. Emerging competitive power loom sector.

Technological

Indian textile market less advanced technology oriented. Rupee appreciation.

Government controlled inputs, high taxes, controlled import of capital goods. Politics had no great role in the industry 2nd largest population. Transforming consumer preference and shopping habits. Low cost of labor. Low cost of production Unexplored global textile markets.

Economical

Regulatory
Political

Socio - Cultural

International

Major Competitors Of Arvind Brands

PORTERS FIVE FORCES MODEL

COMPETITIVE RIVALRY

Huge number of competitors

Competitors adopting aggressive growth strategies as well as eyeing top cities 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

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

CFO

Operation Head

Marketing Head

Finance Head

HR Head

Production Head Spinning/Weaving

Engineering Head

Inspection Head

Production Head Finishing

Logistic Head

Design & Development Head

Section Head Procurement

Section Head Account

SWOT ANALYSIS
STRENGTHS
Strong portfolio of domestic and international brands

Economies of scale through complete integration Latest manufacturing tools Wide geographical presence

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

Competition from global players like Raymond, Bombay Dyeing, Madura Garments Decline in exports Cheap imports from China, Thailand, Bangladesh Rise in raw material price

THREATS

Arvind Brand Basket

Flying Machine Newport
Launched Age group Price range Difficulties faced Retailer Brand ambassador Tag Line 1980 15-30 500-1000 1993 18-28 300-500

Ruf n Tuf
1997 15-30 299-699

Excalibur
1995 18 & Above 500-1000 ----

Hike in exise to Hike in exise to Distribution 8% 8% hurdle own outlet Abhishek Bachchan Who Needs Phoren? own outlet Saif Ali Khan The Measure of Success Big Bazaar Akshay kumar ----

-------

International Brands
Arrow Licensed Lee Wrangler VF corporation Tommy Hilfiger JV with Murjani group
18 & Above Introduced mens sportswear, mens Jeanswear, junior Jeanswear

Cluett, VF corporation peabody & co., USA

27-35 Four sub brand Classic Premium Urban Sports 4-14 & 17-25 Adjudged the images fashion award most admired Jeanswear brand

Age group specifics

17-25 &25-40 Fashion conscious Love wearing denim on weekend Retail ambience was given importance

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

High

Denim
3. Hybrid Perceived added value

4. Differentiation 5. Focused differentiation

2. Low price

1. no frills

6,7,8, strategies destined for ultimate failure

Low

Price

High

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 Development HR Functions

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

Right Part, Right Time, Right Amount Continuous flow Pull system Integrated Logistics

Highly Motivated People

Automatic stop Error Proofing In station quality control 5 Why

Operational Stability Leveled production Standardization of work Visual Management

Corporate Governance
Companys 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

Board Agenda
Agenda papers are circulated to the board members 4-5 days in advance Possible 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

Committees
The Board of Directors has constituted 4 Committees of the Board Audit Committee Remuneration Committee Investors Grievance Committee Management Committee

 Audit Committee Oversight of companys 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 Companys 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 & debentures 2. Dividend, interest & redemption proceeds of debentures 3. Dematerialization of shares & debentures 4. Replacement of stolen, lost & mutilated share & debenture certificates 5. 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 Committees 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.com www.google.com www.wikipedia.org