Table of Contents

1.0 EXECUTIVE SUMMARY3

2.0 INTRODUCTION .....................................................................................3

2.1 Historical Review- Kitex Garments Limited.4

2.2 Legal Framework of Kitex 5
2.3 Corporate Mission..5
2.4 Corporate Vision5
2.5 Background Analysis.6

3.0 STRATEGIC ANALYSIS OF KITEX GARMENTS LIMITED.6

3.1 Core Competencies7
3.2 Competitive Advantages8
3.3 SWOT Analysis of Kitex Garments..11
3.4 Marketing Mix of Kitex ...12
3.5 Ansoff Matrix 13
3.6 BCG Matrix ..14
3.7 Conflict of the Zero-interest earning cash and high cost debt...14
3.8 Strategic Measures to outcome the conflict..16

4.0 CONCLUSION.18

5.0 REFERENCE19

6.0 APPENDIX20

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1.0 EXECUTIVE SUMMARY

The study is to demonstrate the historical review of the core business competency of Kitex
Garments Limited. Using the companys vision, Mission and background analysis. The study
also emphasis on analyzing the core competency and competitive advantages over the other
entities doing the same business. In addition, try to critically discuss the following competency is
strategic and long lasting benefit for the sustainability of the organization. The study also
analyzing one of the recent problem that the company is faced and in depth analysis of the
strategic solution for the listed problem. Kitex garments is operating in India and it is a 100%
exporter of garments especially for kids. The company exports its products to Europe and US
nations. Their manufacturing plant produces great cloths and good quality fabrics.

2.0 INTRODUCTION

Garments industry in India-The articles of clothing industry in India is ruled by sloppy sector.
With few nationalized organizations. India is the second biggest textile maker on the planet with
the record of biggest cotton and jute maker. Studies shows that amid the year 2015-2016 India
created 9 million tons of fiber, which is an extraordinary number. India holds the record of
second biggest limit of material assembling all around. 18% of the world spindles and 9% of
rotor is Accountable for India.

Figure-1 Indian Textiles and Apparel Industry Analysis

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The review is to fundamentally discuss the organization's portfolio. The procedures Kitex used ,
their vision and mission statement .Additionally accentuation on a specific issue which
confronted as of recent by the organization and strategical solutions for conquer it.

2.1 Company Review- Kitex Garments Limited

Chairman & Managing Director Mr. M.C Jacob

C.E.O Mr. Sabu M Jacob
Nature of corporation Private Limited Company
Nature of Business Manufacturing of Textiles
Brand Name Kitex
Annual Turnover 565.3 Crore(INR)
Production Capacity 35000Sq.Mtr/Day
Buildup Area 165000sq.ft
Dealers 1200+
Employees 7000+
Industry Garments/Production/Manufacturing

Table-1 Company Preview

Kitex Garments is one of the subsidiary to Anna Group, which is a well-established garment
company in India. Kitex is a giant among garment industries. Their products are well demanded
because of high quality and standard, which believes as a reason that make them unique among
other competitors. M.C Jacob established Kitex in 1992. Kitex is currently the second largest
producer of children apparel in the world. With great collaborations, Kitex manage to extend
their services to USA and European nations. With their top quality products, Kitex managed to
gain a significant number of customers throughout the years. Kitex plant is capable to produce

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high quality fabrics, Garments, Bags, Polyester blends etc. The plant has the capacity to product
35000Sq meter per day with functioning in 3 shifts. Kitex also focusing on the employee welfare
and providing them best work life environments. Kitex has over 7000 employees working for the
company. Kitex treat them with excellent facilities within the company like employee
accommodation, Canteen, medical support recreation.

2.2 Legal Framework of the Company

Legal framework of the company is the rules and regulations that company is following in order
to the day-to-day smooth functioning. Which is to be followed by each individuals who are
associated directly or indirectly to the company. Kitex is following a structured legal frame,
which can be considered as a success key of Kitex. Each individuals are associated with Kitex
has standing order. Individuals ought to act or perform as per the guidelines and directions of the
order. Any negligence of that order prompt quick end of the worker service.

2.3 Corporate Vision

Like any other organizations Kitex also has visions which they continuously following and
working together to achieve. One of the major vision is to improve their quality in each year. To
become bigger and best. Kitex always has the vision to keep in phase with modern technologies
for efficiency of production and cop up with dynamic business environment. Kitex is practicing
Total quality management with committed leadership. Kitex continuously improving their
strategy to become best among other players.

2.4 Corporate Mission

Kitex focuses on the quality of fabrics. Their mission is to provide high quality fabric to the
customers in a well efficient, professional and environment friendly manner in right cost and
right time. Thereby to become one of the world class organization.

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 2.5 Background Analysis

Kitex Garments is one of the enormous ship in the small ocean. It has a huge return in most
recent 3 years particularly 8x returns despite the fact that there is half fall in stock price . Kitex is
one of the well demanded and well reputed brand by customers. if the event that the fall in stock
price was not occur the return would be 16x!! . However, there is something else which is
interesting about Kitex. which will examine in the review.

Figure-2 Revenue details in the last five financial years.

3.0 STRATEGIC ANALYSIS OF KITEX GARMENTS LIMITED.

The company's growth since its origin is remarkable. Phenomenal growth of Kitex is mainly due
to its collaborated effort with conglomerates in USA and Europe. When discussing the workforce
Kitex is the largest employment provider in India with the number of 7000+employees. This part
of the examining the center competency and competitive advantage over competitors doing same
business. In addition, an attempt to discuss the company's competency is key and enduring
advantage for the sustainability of the company. The review likewise investigating one of the
current issue that the organization has faced. Inside, and out examination of the key answer for
the recorded issue.

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 3.1 Core Competencies

Core competency is broadly used way to deal with concentrate on accomplishing authoritative
objectives and goals. Core competency is the zone of specific ability as far as innovation and
work action (Gallon, Stillman 1995:20). The resources are contrast from each organizations.
These resources can be arranged as tangible and intangible, in this manner the differentiation in
resources available brings about the difference in competency level between the organizations.

Resources are the accessible elements claimed and controlled by the organizations. A companys
capacity and assets decides gaining superiority. Distinguishing market, creating resources will
help the firm to pick up predominance in a focused market. Input based ability is called assets.
The consistency of firms production quality is ability based core competencies. it help to enters
to new market, exploit emerging market sector and enhance new thoughts. A portion of the core
competencies of Kitex is clarified underneath.

a) Plant- Capacity of production

The production capacity of plant is 35000sq.Mtr per day . It is quite a big number comparing to
another subsidiaries doing the same business. The company is efficiently using 100% capacity of
the plant. Kitex has installed the capacity of 383 power looms. In addition the company has
installed 22 modern looms. It is called Sulzer looms.

The plant is monitored by experienced professionals and expertise to ensure that the full potential
of the plant is utilized . Newly hired people are capable of work in the plant only under the strict
monitoring of experienced supervisors.

Another advantage of the modern power looms is reduced man power. Ordinary looms required
2 persons in case of modern power looms it need only 1 personal. The company focusing on
modernizing the plant completely and 75% of the procedure is done already.

b) Incredible Profitable Commodity business

Kitex generate vast majority of their profit from export markets like USA and Europe. The
company exports infant garments to the Nations. A major portion of the revenue is also from
Kitex Children wear which is the related party. Kitex has very strong customer base including

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Jockey, Carters, Gerber, Toys R Us, . These are the major source of revenue. To be exact its
80% of the revenue is from the mentioned customer base.

The company has exceptionally high profit margin and Return on Investment. Kitex can be
defined as world most profitable apparel manufacturing company in the globe (Described by
ROCE-Return in capital employed). Kitex is a B2B company which is more profitable than other
B2C apparel companies like (page industries owns the license of jockey in India)

c) Collaboration with major conglomerates in the US and Europe.

The company itself state that they have exceptionally unmatched collaboration with major
conglomerates in USA and European markets. Which make them unique among other national
subsidiaries doing the same business. In addition, it is their one of the major core competencies.

3.2 Competitive Advantages

Competitive advantage is doing the business in a matter that it help the firm to acquire market
share of the overall industry than the others. Competitive advantage is an organization's capacity
to show improvement over the others in the market. If a customer trust or prefer ones product
than the others that is simply called competitive advantage. For better Competitive, favorable
position the organization must focus on some of the elements like, Quality of the item, Brand
value, Brand loyalty, Research and Development.

Competitive analysis of company can be measured in the terms of firms market position.
Competitive advantage can be differentiated as 2 types differentiation and lower cost. A firms
ability to design, produce, and find the customers in efficient manner is called lower cost. A
firms ability to provide its goods and services at a lower cost will translate to superiority.
Differentiation is a firms ability to provide unique products in terms of design, features, Product
quality or after sales service which helps the firm to command a premium price thus it leads to
competitive advantage over the competitors (Porter, 1985) . Eg. Apples iPhone.

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Figure-3 Porters generic strategies for competitive advantage
Kitexs competitive advantages can be describes as-

a) Superior to the competition

Kitex is a firm, which is superior to the competition because of many reasons like the quality of
the materials, design, price strategy etc.

b) Pioneer in the Category as a brand

Kitex has their own brand to display which most of the competitors does not.

c) Biggest Manufacturer of textile maker

Kitex is the biggest manufacturer of textile in south India. And has the capacity to product
35000Sq meter per day with functioning in 3 shifts has over 7000 employees working for the
company.

d) Successful Distribution channel

Another competitive advantage over the competitors is the 3 tier channels of distribution Kitex
has. They have their own outlets to make the products available directly to the consumer with
reduced cost.

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Figure-4 Distribution Channels of Kitex Garments.

e) No Trade unions

Most of the Indian companies has the difficulty in dealing with the employee trade unions
effectively. One of the major advantage for Kitex holds is their employees does not involve in
any trade union memberships. Results in no strike, No conflicts. So there will be a direct
connection with Employees and management

f) ISO Certification

Kitex has ISO 9001 -2008 Certification which most of their competitors has not.

g) Products are Benchmark

Kitex has high quality products, which make them unique and most preferable among the
customers. Its premium quality is trust worthy and thus it makes the benchmark.

f) Good Market share

Kitex has gained good market share with in small span of time. Which is beneficial over the
subsidiaries doing the same business.

Figure-5 Company Market Share.

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 3.3 SWOT ANALYSIS OF KITEX

Strength Weakness

- Superior to the competition -Absence of mechanical headway

- Pioneer in the Category as a brand -Hard to use the maximum capacity of

Employees
- Biggest Manufacturer of textile maker
-Absence of proper training to workers
- Successful Distribution channel
-Absence of current hardware and quality
-Better Employee employer Relationship
checking machines

Opportunities Threat

- India has an enormous growth opportunity for - Existence of global contenders

textile industry
-Effect of Chinese substitutes
-Kitex has extent of development to universal market
-Change in technology
-Scope for development in market demand
-Absence of advancement
-Accessibility of land for development

-scope of development for Rural population

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 3.4 Marketing Mix of Kitex Garments

Figure-6 Marketing Mix of Kitex

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 3.5 Ansoff Matrix of Kitex Garments Limited

Figure 7- Ansoff Matrix Kitex Garments

3.6 BCG Matrix of Kitex Garments

Figure-8 BCG Matrix of Kitex Garments

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 3.7 Curious case of Zero Interest Earning cash & High cost Debts.

Kitex garments is operating in India and it is a 100% exporter of garments especially for kids.
The company exports its products to Europe and US nations. Their manufacturing plant produces
great cloths and good quality fabrics. Kitex is considerably very successful and matured
organization in nature. Anyways in the recent times, the company is facing a hard situation,
which is described below.

Business generates super cash from operations when it has remarkable profitability. The case of
Kitex is not different. The organization made profit of INR.340 Crores in free cash flow (FCF) in
the previous 5 years. It is quite often that any organization procures so much Free cash flow the
overabundance money ought to pay to shareholders as profit or pay down its debts. Kitex has
been an exemption here. During the most recent five years Kitex just payed out not as much as
INR. 30 Crores, which is a less sum as an organization has a great profitability and more income.

During this period the debts of the company has shockingly expanded. This is an exceptional
case of non-efficient strategic decision-making. Since the debts ought to be regularly paid off,
else it will badly influence the stability and life of the organization.

It is very important to pay off the debts since the interest rate is high as 11.9% for each year yet
the money which keep in long term fixed deposits are only 8% for every year. It is quite hard to
determine why an organization like Kitex needs to keep on paying high interest costs when it
has enough money to pay off the entire debt.

In any case, this is even not the most surprising part of Kitex's money condition. Kitex does not
change over their foreign trade income into Indian rupee, Rather they simply keep it in the
current account as USD ($) and not gaining any single cash as interest. Kitex clarify this
extraordinarily hard case as in view of the present CEO of the organization Mr. Sabu Jacob
imagines that he will create a higher profit by changing over the us dollar when Indian money
devalues and rate of dollar increases in the future. it is even surprising that Mr. Jacob trusts that
he can produce returns higher than 11.9% (the interest on cost of debt) per annum by indulging
currency speculations.

It is shocking reality that the current non-efficient core activity affects terribly on Kitexs
corporate governance standards. Most of the business analysts and finance specialists strongly

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disagree with this non - strategic choice of Mr. Jacob. Anyways throughout the most recent year
in 2015, Mr. Jacob said that he would pay off the whole debts at the earliest. However, it did not
happen yet on the grounds because of the reason that Mr. Jacob is not happy with the present
exchange rate of USD over INR.

Total Debts in last 5 financial years

in Crs FY12 FY13 FY14 FY15 FY16

Total Debt 101.5 101.2 134.2 161.2 110.1

Interest Cost 18.8 13.1 12.3 21.1 16.1

Avg. Cost of
17.9% 12.9% 10.5% 14.3% 11.9%
Debt

Cash & Cash

36.5 41.2 103.6 203.3 254.5
Equivalents

Interest Income 0.3 0.4 0.4 0.4 0.3

Avg. Interest on
1.4% 1.0% 0.6% 0.3% 0.1%
Cash

Table -2 Total Debts of last five Financial Years

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Even the Problem does not end there The Reserve Bank of India regulates any companies doing
business in India should only deal with Indian Rupees. In fact, all the foreign reserves of the
companys should immediately covert to Indian rupees. Which is a hard situation for Kitex. All
the banking experts says that there is no way to keep the foreign reserve with the organization at
any cost. In addition, it did not have any alternative option. So while the Management of Kitex
says their whole trade has been lying out in US Dollar throughout the previous years, it is not
clear how they can do as such considering when the RBI does not permit it.

One of the reasons given by the Kitex management for not reducing its debt burden is the subsidy
it gets under the Technology Upgradation Fund Scheme (TUFS) of the government. As per Kitex,
the TUFS subsidy effectively reduces the interest cost on their debt (bringing it down from 11.9%
to 7%). While it does not make sense to incur even a 7% interest cost, the TUFS subsidy does
reduce the negative impact of the debt burden.

However, as per the last 10 years annual report, Kitex does not seem to get a significant amount
of subsidy from TUFS. Kitex has only recognized a TUFS subsidy income of INR 12 crs over the
last 7 years. Most of this subsidy income actually came in the earlier period of 2010-2012. In fact,
over the last 3 years when Kitex has seen the highest cash accretion it has received a TUFS subsidy
of only INR 2 Crs. This data conflicts with the management assertions of TUFS subsidy driving
down net interest costs. If Kitex does receive sizable TUFS subsidy, why doesnt it show up in its
audited accounts. Is always a question.

3.8 Strategic Measures to outcome the problem

The problem of zero interest earning cash and high cost of debt has occurred may be because of
the non- efficient way of decision-making. In addition, includes personal bias at some extend.
The solution for overcoming these problems are focusing on the companys debt management
efficiently. This section of the study analyses the following factors, which helps the firm to
strategically overcome the problem of cost of debt and zero interest earning. It is surprising fact
that a company like Kitex is stuck on this conflict of poor financial decisions. In fact the
decisions are terribly affecting on Kitexs corporate governance standards. Most of the business
analysts and finance specialists strongly disagree with this non - strategic choice of Mr. Jacob

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Debt Management Strategies

a) Reduce Inefficient Debts

The upsides of diminishing inefficient debts are

-Increment in equity and it can be used as security to acquire for investment purpose

-Gives more cash flow at the finish of the credit term, it can be used to reimburse different debts.

-Reduce the debt and reduce interest rates

b) Increase the Regular Payments

Increasing consistent reimbursement of loans will bring about diminishing the interest charged
and principle amount of the debt. Expanding size of the repayment includes exchanging the
surplus money to the organization's debts.

c) Increase the installment recurrence of the credit

Expanding the installment frequency of the loan will lessen the interest rate and size of aggregate
debt. Obviously if the frequency of the repayment is less it will expand the interest charge and
outstanding of debt.

d) Merging the Debt

Consolidating the overall debt into one loan at a smaller interest rate is an easy way to manage
the debt additionally it features to repay the loan quickly and efficiently. Loan Consolidation will
help to reduce the cost thus it will result in the overall efficiency of the firm.

e) Sustainability in Financial and Strategic Decisions

It is very essential to a firm that decisions should be taken effectively and efficiently. In the case
of Kitex, they are not efficient in decision making. As a result, company is paying; high interest
rate and it result in increasing debt rate.

_____________________________________________________________________________

However, the decision should be taken out by the current C.E.O whose decision is to keep the
foreign reserves in USD. In addition, decided to convert it during the occasion when us dollar

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surplus a high rate over Indian rupee. It is very important to repay the debts in frequent period. In
order to avoid paying high interest rate. Increase in debts will affect the firms long-term
performance badly. The curious case of Kitex is very hard to digest they are a firm with high
profit margin yet are not paying back its debts efficiently. Financial experts states that the move
is most inefficient way of dealing with money. The decision will affect the firms corporate
governing strategy badly over the period. As we discussed above the firm should carry out
immediate measures to outcome the problem effectively. However, Mr. Jacob promised that
Kitex would start paying off their debts by this year. May be they will pay off their entire debts.
If the company is following the same strategy in coming years, it will affect even the life of the
company badly. Another restriction that Reserve bank of India has announced recently if any
company dealing with foreign exchanges should be converted to Indian Rupee immediately. This
is also a major challenge for the company. Now we need to see how the company is going to face
this challenge and resolve it.

4.0 CONCLUSION

The review critically exhibit the chronicled survey of the core business competency of Kitex
Garments Limited. Kitex garments is operating in India and it is a 100% exporter of garments
especially for kids. The company exports its products to Europe and US nations. Their
manufacturing plant produces great cloths and good quality fabrics Which is a market leader
among their competitors. Although the company is doing the great in terms of profitability and
market share. Still the company faces some problems in their sustainability may be due to lack of
effective decision-making. Using the organization's vision, Mission and foundation examination.
The review likewise accentuation on dissecting the center competency and competition
advantage over alternate subsidiaries doing same business. This also attempt to examine the
competency is key and enduring advantage for the sustainability of the organization. The review
additionally dissecting one of the current issue that the organization is confronted which is
increasing payment of interest rate and zero interest over their money in long-term deposits.
Inside, and out examination of the key answer for the recorded issue .The review also discussed
some of the strategic measures to overcome the problems like Reduce Inefficient Debts, Increase
the Regular Payments, Increase the installment recurrence of the credit, merging the Debt.

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Through following the mentioned strategies, Kitex would be able to recover their current
positions. The recommended solution are based on strategic thinking and planning. The study
also defined the firms current market positions, threats and the challenges the firms are facing.
The information is collected to strategic analysis.

5.0 REFERENCES

-Anders Drejer, 2002. Strategic Management and Core Competencies: Theory and
Application. Edition. Praeger.

- Andrew Campbell, 1997. Core Competency-Based Strategy. 1 Edition. Cengage Learning

EMEA.

- Milan Mehta, 2011. Core Comps: The Essential Guide to Driving Instructor Core
Competencies. Edition. DITA.

- Quienton P Nichols, 2011. Advancing Core Competencies: Emphasizing Practice Behaviors

and Outcomes. 1 Edition. Pearson.

- Abdul Gani, 1991. Labour-Management Relations: A Study of Textile Industry Edition.

Concept Publishing Co.

- Pradip V. Mehta P.E., 1998. Managing Quality in the Apparel Industry. Edition. National
Institute of Fashion Technology.

- Upendra Kachru, 2015. Strategic Management (English) 2 Edition (Paperback). 2nd Edition.
McGraw Hill Education (India) Pvt Ltd..

- Kazmi, 2015. Strategic Management. 29.51 Edition. Mc Graw Hill India.

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APPENDIX

List of Figures

Figure-1 Indian Textiles and Apparel Industry Analysis

Figure-2 Revenue details in the last five financial years.

Figure-3 Porters generic strategies for competitive advantage

Figure-4 Distribution Channels of Kitex Garments.

Figure-5 Company Market Share

Figure-6 Marketing Mix of Kitex
Figure-7 Ansoff Matrix Kitex Garments

Figure-8 BCG Matrix of Kitex Fabrics

List of Tables

Table -1 Company Preview- Vital Statistics

Table -2 Total Debts of last five Financial Years

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