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Classic Knitwear and Guardian: A Perfect Fit?


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1. Product Market Fit Classic Knitwear operated in $24.5 billion category of non-fashion casual knitwear. The branded side of non-fashion knitwear market was dominated by three large manufacturers !ames"rands #$4.5 billion$% &lowerKnit #$'.25 billion$ and (reen)ille Corporation #$*.+, billion$. These big brands operated on gross margin of around ,*-4*-. .n unbranded segment% Classic competed with little known firms like "/" 0cti)ewear which held market share of 2,.+- and the 1"ig Three2 were also in)ol)ed in this market. Company Sales Market Share

!ames"rands $4.5 billion '3.,4&lowerKnit $'.25 billion 5.'*(reen)ille Corporation $*.+, billion 2.53There was a customer need for protection against the rising insect-borne illness and the customers were dissatisfied with few pre)ention products a)ailable in the market. The category is )irtually non-e5istent in the mass market as the present players in the insect repellant clothing only sold in niche markets. (uardian brand had high le)el of awareness and it had patented insect-repellant clothing technology. The product had a good market potential due to its inno)ati)eness.

Product Company Fit The product offered gross margin ,36,7- which would enhance the margins of Classic Knitwear from '3- which was substantially lower compared to industry standards. This inno)ati)eness of the product can be le)eraged by the production efficiency of the company to achie)e a sustainable competiti)e ad)antage. The company had a moderate cost ad)antage o)er other 89 producers due to high-)olume% low 9K8 production runs. The addition of the new product meant addition of '+ 9K8s. This new product might lead to some inefficiency in its present system.

2. Response of the trade(channel) :resently% the retailers were pro)ided with 5*- margin on branded knitwear and 4*margin on pri)ate-label knitwear. The new product would pro)ide the trade a 45margin. ;ur opinion is that displays would occupy a large amount of retailers< space

and also the retailer margin is on lesser side i.e. 4 ! "s #! offered by other brands. This would not encourage the retailers to stock the product. "ut the pro)ision of trade promotion and ad)ertising allowance might induce them to stock the product. The company pro=ected sales would be '*%*** displays within two years of product launch% of which 5*- would be in discount stores% 25- in general merchandise stores% and 25- in sporting goods and apparel stores. >e think that as the company has no e5perience in selling to these retail channels% it has to spend considerable resources to de)elop the channel. The company would make the (uardian shirts a)ailable to its e5isting wholesale clients for distribution to interested screen painter in a later period as it has currently decided to brand the product as 1(uardian 0pparel2.

Response of the Consumers "ased on the consumer research% '3.5- of the thousand respondents #'35 respondents$ were interested in the product. "ased on past market research e5perience% $#! of the respondents who indicated they would definitely try # %&!$ would do so #22.& !$ within the two-year introduction period. The company also predicted that at least 5*- #11.4!$ would buy an additional shirt the following year.

%. 'nalysis of proposed marketin( pro(ram) They are launching the product in the sole brand name of ?(uardian 0pparel<% and ha)e decided not to include the name ?Classic Knitwear< The launch is scheduled in !anuary *4% which might not be the perfect time to launch this product as its sales are supposed to be seasonal% it would be better to launch at the end of winter so that the sales pick up instantly The number of 9K8s is '+ which include 4 designs in 4 different colors. 0s the product is specifically meant for outing% the number of 9K8s can be reduced by using only the two most popular colors. The market research is not e5tensi)e and should not be relied upon fully for making important decisions .nitial distribution is planned through ma=or sporting goods and apparel chains which would support the establishment of the brand in the introductory phase. The , @o. of sales reps to focus on this sector might not be sufficient for the whole country.

4. *icense '(reement This agreement forced Classic to meet series of steadily rising annual net sales target o)er the first four years and target for 4th year must be met in each subseAuent year. .f it failed to meet the reAuirements then the license would be cancelled and )oid.

There are loopholes in the branding of the product. ;nly (uardian logo is being used on the product. .t may create problems for Classic if there is any conflict between companies o)er agreement in future. >ith this agreement a short term benefit can be )isualiBed as the determined marketing in)estment has been reduced to $, million from initial e5pectation of $3$'* million. 0s the brand )alue of guardian will increase by its promotion they should also bear some part of marketing e5pense.

. +reak ,-en "olume of the product +R,'. ,",/ "0*1M,S CanufacturerDs 9elling :rice Cost ;f (oods Trade :romotion #5-$ 0d)ertising allowance #'*- for 2*- retailers$ Contribution Cargin per 9hirt "reake)en 9ales#9hirts$ for 2 years 'ssumptions .. ... .... Fi2ed Cost E $,.* C #0d)ertising$ F $ 5'****#9alary of , 9ales people for 2 years E 35***G,G2$ F $ '**%***#licensing cost$. 3rade Promotion E 5- off-in)oice. 'd-ertisin( allo4ance E '*- of the 2*- of retailers.

'4.34 '*.32 *.37,5 *.,544 5.477' $22 1#

$. 5emand for the product 5emand ,stimation 89 Cen :opulation #age '5 and abo)e$ '*%**%**%*** Target Carket#'3-,5$ population#0ssume $#! of Total :opulation$ 0wareness among Target 0udience in two years #2 !$ 0wareness in first Hear #12. !$ 0wareness in 9econd Hear #12. !$ Consumers interested in the product as per sur)ey #1& 61###$ in first year +%**%**%*** '5****** 45***** 45***** ',345**

Consumers Idefinitely would buyI as per sur)ey# %&!$ in first year Consumers that would buy based on past e5perience#$#!$ in first year Consumers that would buy in second year#0dditional 9hirt$ Consumers that would buy based on past e5perience#$#!$ in second year 3otal 5emand in 2 years(,stimated)

52425* ,'+,5* '53'45 ,'+,5* 78#&7