Style & Trend : Strategic Choice

Submitted By: Omar Ghani Malik Awais Shehryar Ali Bilal Iqbal

Strategic Issue and Problems

Drive strategy to make new venture successful Decision Criteria
Financial compatibility Operational Compatibility

Industry Analysis
Average Annual Export Growth in Various Sectors
35 30

25

20

15

Average Annual Export Growth in Various Sectors

10

0 Knitted Towels Bedwear Total Export

Pakistans Position in Export

60 50 40

30

% By Value %by Volume

20

10

0 Pakistan China HongKong Taiwan

SWOT Analysis of Knitwear Sector

Strength
Low fixed cost (25%) and high net profit (20%) Large volume sale in low value products Credit purchase of 30 days

Weakness
Just 14.7% of total textile export Poor Quality Only Grade B Yawn available for knitwear production locally Complex operational variable demands highly efficient organization Operational Limitation Inability to maintain good quality with larger volume Unavailability of Sophisticated equipment and technology in Pakistan

Opportunities

Threat

Tap high quality product Uncertainty in market forces like: Lack of vertical integration trend Size of cotton crop Ability to add 400% value to yarn Price of input Good reputation always ensure steady supply International textile industry dynamics of orders Government policies Effect of Quota Price in case of export to US

SWOT Analysis of Style & Trend

Strength
Availability of debt from financial institutes Firm have managed to improve its profitability Levis have shown interest in firm due to managements capabilities

Weakness
Quick Ratio of .45 indicates that firm is not in very healthy position to meet its short term liabilities Current ratio of 48.36 indicates that firm is sitting on excessive inventory Increase in days receivable while decrease in days payable putts a negative impact on availability of working capital Lack of long term strategy Inability to meet complex orders Net Profit is below industry standards Non Availability of High quality raw material

Opportunities
Growing industry Untapped foreign market in high value products Limited competition High value products may add up to 40% in net income

Threat
Uncertainty in market forces like: Size of cotton crop Price of input International textile industry dynamics Government policies Effect of Quota Price in case of export to US

Financial Comparison
Quota Expenses S1 Quota Expenses S2 Quota Expenses S3 Marketing Expenses S1/Doz Marketing Expenses S1/Doz Marketing Expenses S1/Doz Sub Total Expenses S1 Sub Total Expenses S2 Sub Total Expenses S3 Change in Working Capital Requirement S1 (000) Change in Working Capital Requirement S2 (000) Change in Working Capital Requirement S3(000) 1994 PKR 196.0 PKR 90.4 PKR 20.7 PKR 0.0 PKR 14.2 PKR 15.3 PKR 196.0 PKR 104.6 PKR 36.0 1995 PKR 196.0 PKR 112.6 PKR 19.0 PKR 0.0 PKR 15.0 PKR 15.5 PKR 196.0 PKR 127.6 PKR 34.5 1996 PKR 196.0 PKR 112.6 PKR 19.0 PKR 0.0 PKR 17.6 PKR 17.3 PKR 196.0 PKR 130.2 PKR 36.3 1997 PKR 112.0 PKR 70.9 PKR 19.3 PKR 0.0 PKR 19.0 PKR 18.6 PKR 112.0 PKR 89.8 PKR 37.9 1998 PKR 0.0 PKR 0.0 PKR 0.0 PKR 0.0 PKR 20.3 PKR 19.5 PKR 0.0 PKR 20.3 PKR 19.5

PKR 21,600.0 PKR 28,800.0 PKR 13,068.0 PKR 15,246.0 PKR 4,212.0 PKR 2,808.0

PKR 0.0 PKR 0.0 PKR 0.0

PKR 0.0 PKR 0.0 PKR 0.0

PKR 0.0 PKR 0.0 PKR 0.0

Net Income S1 (000) Net Income S2 (000)

PKR 1,865.0 PKR 12,174.0 PKR 19,895.0 PKR 37,534.0 PKR 57,858.0 PKR 6,777.0 PKR 18,410.0 PKR 23,839.0 PKR 35,499.0 PKR 50,651.0

TOWS Matrix : Strategic Choices

EFAS IFAS Strengths Weakness Focused strategy on simple, high yielding products thus avoiding complex order until operational effectiveness is achieved (S 1,2) White Plain T Shirts for EU while range of T Shirts for US (S1,2) Opportunities Enter high value product like knitwear in foreign market (Market Diversification S 1,2,3) Use debt to start large scale production thus achieving economies of scale S 1, 2) Use favorable response from Levis to enter US market thus Increase profitability by taking advantage of higher margins in foreign market (S1) Enter market without quota completion or low quota price(S 2, 3) Import raw material of high quality from foreign countries like ZMB or TKY thus reducing reliance on local purchase Establish production units in Bangladesh

Threats

Focused strategy thus only manufactures white T shirts for EU and ME (S2, 3). However this will reduce asset utilization significantly. Furthermore high cost of quality raw material may drive cost over the roof. This strategy required further analysis of raw material prices

Conclusion