Style and Trend: Strategic choice

Presented by:

Muhammd Farhan Mustafa Rasheed Nauman Rasheed Sami Suhail Taimoor Khalid Usman Ali MBA-2, Section-B

Quantitative Facts
By 1993, textile formed about 65% of Pakistans total exports of Rs. 6.8 billion with knitwear Average for knitwear selling price was $42 per dozen in 1992 US knitwear market, estimated at around $15 billion Quota investment alone would require Rs. 50 million.

Qualitative Facts
High profitability in knitwear US market deal with large orders European market: small orders, high variety, price competition, trendy and colorful Distribution: direct selling; managerial and financial inefficiencies Promotion was mainly through direct mail, trade fairs and agents in Europe

Issues
Shortage of finance restricting Style and Trends to small units The textile industry could not produce very fine yarns Lead time is high in knitwear industry Strict criteria of international buyers in selecting suppliers Poor working capital of several units

Core Issue

Evaluation of integrated knitwear firm opportunity and management (all three entrepreneurs)

Exhibits Analysis
Exhibit-1: current ratio, quick ratio, days receivable and days payable highlight some negativity, debt has decreased over period, total debt/total assets changed from 37.08% to 4.81% Exhibit 2: knitwear textile exports have grown to $464.1 million in 1993 from $166.9 million in 1988. Exhibit 8: Pakistan scores lowest in production & management dimensions relative to other competing countries

Exhibits Analysis

Exhibit-9: Pakistan has lowest value to volume ratio and thus it earns less foreign exchange with massive imports Exhibit-12: This exhibits shows increasing general trend in quota prices and suggests a great degree of volatility in prices for category 338

Alternative-1
Scenario 1: 100% sales to US market in category 338 Advantages Disadvantages New potential supply channels Quantitative trade restrictions Longterm relationships, technological & management assistance Stringent/difficult to meet quality standards Short lead times, less wastage, high working capital Large brandnames & buying houses requirements meant costs No ned to attend foreign fairs or visit buyers offices Quota investments (Rs. 50 million) Steady supply orders -

Alternativ-2
50% sales to US market and 50% sales to Europe & other markets Advantages Disadvantages New potential supply channels for US Quantitative trade restrictions Longterm relationships, technological & management assistance (US) Stringent/difficult to meet quality standards Large brand names & buying houses (US) More stress No ned to attend foreign fairs or visit buyers offices Greate marketing effort in Europe & Far East Reduced quota investments Smaller & costly order Lower working capital Lower margins on European Sales Good margins in Middle East Extra 10% cost Steady supply orders Shorter delivery time for Europe

Alternative-3
Sales to markets other than US Advantages Disadvantages More stress No ned to attend foreign fairs or visit buyers offices Greate marketing effort in Europe & Far East Low quota investment ( a million rupees) Smaller & costly order Lower working capital Lower margins on European Sales Good margins in Middle East Extra 10% cost Steady supply orders Shorter delivery time for Europe

Decision
Scenario 1: (100% sales to US market in category 338) because ; it cannot handle issues or limitations due to suppliers in germination stage to increase responsiveness for entering European and Far East markets. Ginning sector is run by uneducated people who are not quality conscious

Implementation

This option wont create issues in terms of supply Pakistani players dont compete in high value product category. Hence, producing high value items will minimize the impact of quantitative trade restrictions and quota investments