Apparel Industry

by Aman Anshu(13PGP061) Minu Pandey(13PGP091) Puneet Manot(13PGP102) Bhavana Ziradkar(13PGP118)

Indian Institute of Management Raipur

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Introduction
The apparel and textile industry occupies a unique and important place in India. One of the earliest industries to come into existence in the country, the sector accounts for 14% of the total Industrial production, conduces to about 30% of the total exports and is the second largest employment creator after agriculture. The Indian textiles industry that already has an overwhelming presence in the economic life of the country has been given a further boost with the scrapping of quotas in global trade of textiles and clothing. In the post quota period, the size of industry has expanded from US$ 37 billion in 2004-05 to US$ 49 billion in 2006-07. During this period, while the domestic market has grown from US$ 23 billion to US$ 30 billion, exports have increased from around US$ 14 billion to US$ 19 billion. As a matter of fact, the apparel and textile is the largest foreign exchange earning sector in the country. Being the 2 nd highest employer of raw labour it gives a direct employment provider to over 35 million people and with continuing growth momentum, the role of this sector in Indian economy is bound to increase.

Objective
1. Collection of sample data of readymade garments producing companies. 2. Descriptive analysis of the data 3. Preparation of contingency tables for producers as per their Net Profit Margin and consumers according to segment classification. 4. Using stratified random sampling technique to obtain a sample from which inferences can be made.

Brief Summary of Data used

The sources of our data are: www.Crisilresearch.com www.wazir.in (Annexure)

We obtained the Net profit margin of 11 companies (for 5 years each), dealing with the manufacture of readymade garments from Crisil Research. The companies are:
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S.N. 1 2 3 4 5 6 7 8 9 10 11

Name of Company Arvind Ltd. Bhandari Hosiery Exports Ltd. Celebrity Fashions Ltd. Gokaldas Exports Ltd. Kewal Kiran Clothing Ltd. Page Industries Ltd. Provogue(India) Ltd. Raymond Ltd. Samtex Fashions Ltd. Virat Industries Ltd. Zodiac Clothing Ltd.

We obtained the contingency table for the consumption of garments according to the following three categories Mens Wear, Womens Wear and Kids Wear - based on two types of products Branded and Un-branded from a report published by Wazir Advisors a statistics for the year 2011.

Descriptive Summary Population

The population size N =55 = 5*11

Population data.xlsx

Attachment 2: Population data

Descriptives Mean 95% Confidence Interval for Mean Lower Bound Statistic 3.9271 1.8367 Std. Error 1.04266

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Upper Bound Std. Deviation Skewness

6.0175 7.7325 6 -.467

.322

(Skewness)/(Std. Error of Skewness) = -1.45109 (which is greater than -2 and less than 2). Hence we can apply Empirical Rule to obtain ranges of data and density of data. Range of Data Empirical Rule Min -3.81 -11.54 -19.27 Maximum 11.66 19.40 27.12 Density 90% 95% 99% Density (calculated from Population) 67% 95% 98%

Inference: 95% chances that a selected period has a net profit margin in between -11.84 and 19.40 The histogram plot for the population data: Using Tests of Normality Kolmogorov-Smirnov Test
Net Profit Margin Kolmogorov-Smirnova Statistic df Sig. .101 55 .200* Ho: The Population is Normal (p> ) H1: The Population is not normal (p< Shapiro-Wilk Statistic df .980 55 Sig. .472

Here, significant value p= 0.2 Level of significance = 0.05 (95% confidence level) As p > : Null Hypothesis (Ho) that population is normally distributed is accepted.

Probability Contingency Table for Net Profit Margin

The mean of the population of yearly Net Profit Margins is 3.9271% Using this we create a contingency table for mutually exclusive and collectively exhaustive criteria a) NPM>5 b) NPM<5

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Count NPM > Mea n NPM < Mean 2 5 5 4 0 0 0 5 5 0 1

Contingency Table NPM> Mean 0.0545 0.0000 0.0000 0.0182 0.0909 0.0909 0.0909 0.0000 0.0000 0.0909 0.0727 NPM < Mean Total 0.036 4 0.0909 0.090 9 0.0909 0.090 9 0.0909 0.072 7 0.0909 0.000 0 0.0909 0.000 0 0.0909 0.000 0 0.0909 0.090 9 0.0909 0.090 9 0.0909 0.000 0 0.0909 0.018 2 0.0909 0.490 9 1.0000 Revised Probability Page 5

Total 5 5 5 5 5 5 5 5 5 5 5

Arvind Ltd. Bhandari Hosiery Exports Ltd. Celebrity Fashions Ltd. Gokaldas Exports Ltd. Kewal Kiran Clothing Ltd. Page Industries Ltd. Provogue(India) Ltd. Raymond Ltd. Samtex Fashions Ltd. Virat Industries Ltd. Zodiac Clothing Ltd.
Total

3 0 0 1 5 5 5 0 0 5 4 28

27 55 0.5091 NPM>Mean Marginal Joint Condition Probabilit Probabil al

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Arvind Ltd. Bhandari Hosiery Exports Ltd. Celebrity Fashions Ltd. Gokaldas Exports Ltd. Kewal Kiran Clothing Ltd. Page Industries Ltd. Provogue(India) Ltd. Raymond Ltd. Samtex Fashions Ltd. Virat Industries Ltd. Zodiac Clothing Ltd.
Total

Probabili ity ty 0.09091 0.05455 0.00496 0.09091 0.09091 0.09091 0.09091 0.09091 0.09091 0.09091 0.09091 0.09091 0.09091 0.00000 0.00000 0.01818 0.09091 0.09091 0.09091 0.00000 0.00000 0.09091 0.07273 0.00000 0.00000 0.00165 0.00826 0.00826 0.00826 0.00000 0.00000 0.00826 0.00661 0.04628

0.10714 0.00000 0.00000 0.03571 0.17857 0.17857 0.17857 0.00000 0.00000 0.17857 0.14286 1.00000

NPM<Mean Condition Marginal Joint al Probabilit Probabil Probabili Revised y ity ty Probability 0.09091 0.03636 0.00331 0.07407 0.09091 0.09091 0.09091 0.09091 0.09091 0.09091 0.09091 0.09091 0.09091 0.09091 0.07273 0.00000 0.00000 0.00000 0.09091 0.09091 0.00826 0.00826 0.00661 0.00000 0.00000 0.00000 0.00826 0.00826 0.18519 0.18519 0.14815 0.00000 0.00000 0.00000 0.18519 0.18519 Page 6

Arvind Ltd. Bhandari Hosiery Exports Ltd. Celebrity Fashions Ltd. Gokaldas Exports Ltd. Kewal Kiran Clothing Ltd. Page Industries Ltd. Provogue(India) Ltd. Raymond Ltd. Samtex Fashions Ltd.

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Virat Industries Ltd. Zodiac Clothing Ltd.

Total

0.09091 0.09091

0.00000 0.01818

0.00000 0.00165 0.04463

0.00000 0.03704 1.00000

The Contingency calculation can be found in the attached excel sheet:

contingency table with pie.xlsx

Sampling Technique
Population consisted of all the companies of the textile and apparel industry. The parameter taken into consideration was the net profit of all these companies. We could identify data of each company as strata. Random samples were taken from each stratum. Stratified Random Sampling has been used for normalization of the data with net profit of the samples as statistics.

Stratified random sam ple.xlsx

Attachment 1: Stratified random sample

Descriptive Summary Sample

The sample size selected is n =3*11 =33

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Descriptive Sample NPM Mean 95% Confidence Interval for Mean Std. Deviation Skewness Lower Bound Upper Bound

Statistic 4.3021 1.4515 7.1527 8.03932 -.648

Std. Error 1.39947

.409

Tests of Normality Kolmogorov-Smirnova Statistic SampleNPM .106 df 33 Sig. .200

*

Shapiro-Wilk Statistic .970 df 33 Sig. .489

Here, significant value p= 0.2 Level of significance Alpha (a) = 0.05 (95% confidence level) As p > Alpha (a) - Null Hypothesis (Ho) that population is normally distributed is accepted. Hence t-sample test and Z tests can be carried out for the sample. From the data it can be assumed that: o Case 1 H0: the net profit margin (population mean ()) 5

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H1: the net profit margin (population mean ()) < 5 o Case 2 H0: the net profit margin (population mean ()) 3.92 H1: the net profit margin (population mean ()) < 3.92

As

is unknown and n30, so well use the normal distribution and

Zstat test statistics. We have chosen a 0.05 level of significance (i.e. = 0.05) Test of normality
Kolmogorov-Smirnova Statistic NetProfitMargin .101 df 55 Sig. .200
*

Shapiro-Wilk Statistic .980 df 55 Sig. .472

Case 1: Tabulated value of z is 1.6449

Zstat= (x - )/ (^/ n) x=4.3021 = 5 ^ =s= 8.03932 n= 33 Zstat= (4.3021 5)/( 8.03932/ 33) = (-.6979)/ (8.03932/5.744) = (-.6979)/ (1.399) =-.4988 Therefore, |cal z|<|tab z| |-.4988|<|1.6449| Also from one sample t-test

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One-Sample Test Test Value = 5 t df Sig. (2-tailed) Mean Difference 95% Confidence Interval of the Difference Lower SampleNPM -.499 32 .621 -.69788 -3.5485 Upper 2.1527

We observe that p value is greater than the value of , Hence, Accept H0 P(z) = P(0.27) =0.1879, P value > , Hence we may accept Ho As the probability does not lie within the rejection ratio, Ho is accepted. Hence, with 95% confidence, we can say the net profit margin will be greater than 5%

Case 2: Tabulated value of z is 1.6449 Zstat= (x - )/ (^/ n) x=4.3021 = 3.9271 ^ =s= 8.03932 n= 33 Zstat= (4.3021 3.9271)/( 8.03932/ 33) = (0.375)/ (8.03932/5.744) = (0.375)/ (1.399) =.26804 Also from the one sample t-test
One-Sample Test Test Value = 3.9271 t df Sig. (2-tailed) Mean Difference 95% Confidence Interval of the Difference Lower SampleNPM .268 32 .790 .37502 -2.4756 Upper 3.2256

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We observe that p value is greater than the value of , Therefore, |cal z|<|tab z| Hence, Accept H0 P(z) = P(0.27) =0.1064, P value > , Hence we may accept Ho As the probability does not lie within the rejection ratio, Ho is accepted. Hence, with 95% confidence, we can say the net profit margin will be greater than 3.92%.

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Regression Analysis
We have done the regression for 10 brands. However the Regression analysis for Provogue Industry has only been shown below. Same procedure has been followed for the rest of the 9 brands.

REGRESSION CALCULATION FOR PROVOGUE INDUSTRIES MODEL:

Assumptions: a.) Linearity: We assume that the factors are linear. b.) Independence of errors: Durbin Value=2.47 which is slightly more than 2. Therefore the errors are slightly negatively co-related. However, It is accepted. c.) Normality of errors: The PP graph shows that the errors are normal. d.) Equal variance: Homoscedasticity found. Therefore accepted. Since the equation follows all the assumptions, therefore, we go forward with the calculations. The calculations are done at 95% confidence level, Therefore =0.05

Calculations: We assume the equation as: PRO NPM = 0 + (1 Pro_Emp) + (2Pro_Sell)+ errors From the model Summary, we see that adjusted R2=.942, which indicated that these two factors add to 94% of the value of the Pro NPM. From the Annova table, we test the validity of the model. H0: All Bi=0, ie: model is invalid H1: At least 1 Bi is not equal to 0, Model is valid. Here from the Annova table, we see the significance (p) = 0.058> =0.05 Therefore, H0 accepted and so the model is Invalid. Significance of Independent Variables: o H0: B1=0, Pro_Emp is not a significant value H1: B1not equal to 0, Pro_Emp is a significant value (p) = 0.207> , Therefore H0 accepted, hence ProEmp is not a significant factor. Indian Institute of Management Raipur Page 12

H0: B2=0, Pro_Sell is not a significant value H1: B1 not equal to 0, Pro_Sell is a significant value

(p) = 0.465> , Therefore H0 accepted, hence ProSell is not a significant factor However, we proceed with the further calculations to show the mandated process. Collinearity Statistics: We see the VIF value >10 or 20 Therefore, It is a matter of concern and hence collinear. Getting the Value of the Coefficients from the Co-efficients table, we get the final equation as: PRO NPM = 18.250 + (-0.592* Pro_Emp) + (0.238* Pro_Sell) This equation tells that: a) If there is a 1 unit change in Pro Emp and all the other factors remaining constant, average estimated Pro NPM reduces by -0.592. b) If there is a change of 1 unit in Pro Sell and all the other factors remaining constant, average estimated Pro NPM increases by 0.238. c) Also, If Pro Sell and Pro Emp are 0, still, Pro NPM is 18.25, and therefore there are other factors also that add to the profit/loss.

The Regression data for rest of the brands is consolidated in the excel sheet attached below.

Regression for Apparel Industry.xlsx

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Annexure: Probability Contingency Table for Garment Categories

The data available segregates the consumption of Branded and Unbranded garments in different exhaustive categories of Mens Wear, Womens Wear and Kids Wear. The probabilities evaluated from the data are of the form (marginal): o Money Spent on Branded garments o Money spent on Un-branded garments o Money spent on Mens garments o Money spent on Womens garments o Money spent on Kids garments

The Contingency table so formed is:

Event Set (in Billion US Dollars) Catego ry Men Women Kids wear Total Brand ed 5 4 1 10 UnBranded 11 10 9 30 Tot al 16 14 10 40 Contingency Table Catego ry Men Women Kids wear Total Brand ed 0.125 0.1 0.025 0.25 UnBranded 0.275 0.25 0.225 0.75 Tot al 0.4 0.3 5 0.2 5 1

The conditional probabilities for different pre-conditions are presented below: Branded Categ ory Marginal Probabilit Joint conditiona l Revised Probability Page 14

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UnBranded

Men Women Kidswe ar Total Catego ry Men Women Kidswe ar Total

y 0.4 0.35 0.25 Marginal Probability 0.4 0.35 0.25

0.125 0.1 0.025 Joint 0.275 0.25 0.225

0.05 0.035 0.00625 0.09125 conditional 0.11 0.0875 0.05625 0.25375

0.547945205 0.383561644 0.068493151 Revised Probability 0.433497537 0.344827586 0.221674877

Mens Wear

Branded UnBranded

Margin al 0.25 0.75 Margina l 0.25 0.75 Margina l 0.25 0.75

Joint 0.125 0.275 0.2375 Joint 0.1 0.25 Joint 0.025 0.225

Conditiona l 0.03125 0.20625 Conditional 0.025 0.1875 0.2125 Conditional 0.00625 0.16875 0.175

Revised Probability 0.131578947 0.868421053 Revised Probability 0.117647059 0.882352941 Revised Probability 0.035714286 0.964285714

Women s Wear

Branded UnBranded

Kids Wear

Branded UnBranded

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