Markets and Strategy - CW1 BMM20

Buckinghamshire New University

itle: Module Title: Markets and Strategy

Module Code: BMM20

Student ID No: 21125373

Dissertation Title: A Review of a Firms Operating Environment

Module Co-ordinator / Tutor: Cicely Davey, Steve Millard

Word Count: 1085

Submission Date: 12th February 2012

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Table of contents Part 1: Page Number

Executive Summery

1. Sri Lanka Apparel industry overview 2. Global Apparel Industry Overview 3. Main Players in Sri Lanka Apparel Industry A. Brandix Lanka B. MAS Holdings C. Hidaramani Industries 4. Competitor Analysis 5. Porters five forces model for maliban 6. Conclusion 7. References 8. Bibliography

3 4 5 5 5 6 6 6 9 10 10

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Executive Summery The objective of this assignment is to assess the operating environment, its main competitors, its market share using Porters 5 forces model for EAM Maliban Textiles (Pvt) Ltd. heron known as Maliban. Maliban is one of large scale apparel exporting companies in Sri Lanka employing over 12000 man power and operating in 12 locations in Sri Lanka and Jordan, its production capacity exceeds 1.7 million pieces a month. Customer portfolio includes many global brands. Maliban is specialised in woven garments manufacturing and offers a one stop solution for the global customer.

1. Sri Lanka apparel Industry overview

Sri Lanka apparel export industry is the most significant and it is the second largest foreign currency earner accounting 40% share on annual exports. According to apparel exports association of Sri Lanka, garments exports have reached 4 Billion US$ at the end of 2011 financial year.

The industry has grown by 47% in the exports to the Europe and by 28% to the United States. (Sri Lanka Apparel exporters association,2012) apparel industry is the largest employer in manufacturing sector in Sri Lanka which is employing 15% of employment either directly or indirectly. The industry has been positioned as socially responsible and preferred destination for apparel sourcing.

Sri Lanka having established itself as a reliable supplier of quality garments at competitive prices, also carries ethical practices and been identified as a producer of
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Garments without guilt making the Made In Sri Lanka label synonymous with quality, reliability together with social and environmental accountability.

2. Global apparel industry overview

Below figure 1shows apparel manufacturing global market share in 2006 Figure 1

Source: Fashion Products

The industry have become more labour intensive and requires less capital investment in shifting more towards developing countries hence the industry has been decreased from developed counties between 1980 and 1996 and at the same time developing countries increased six times according to fashion products. Asia Pacific constitutes the largest amount of production and the trade in apparel industry worldwide. The percentage shares of different regions are shown in appendix table 1. Apparel manufacturers are now adapting new techniques to increase the trade. New business models and competitive strategies are used to enhance profit and growth.

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3. Main players in Sri Lanka Apparel Industry

Maliban has annual turnover has been shown in figure 2 Figure 2

Maliban Turnover (US$ Million)

250 200 150 100 138 50 0 2007 2008 2009 2010 2011 2012 154 157 200 220

180

Source: EAM Maliban Marketing Department, 2012 Department

Maliban is having an annual growth rate of 10% and holds a market share of nearly 8% in Sri Lanka apparel Exports.

Other main apparel manufacturers in Sri Lanka are listed below.

A. Brandix Lanka
Brandix Started in 1972 and it has springboard to 34 plants and employee over 35,000 people directly. Brandix is owing an over 20% market share generate a turnover around 800 million US$. It has also moved its operations to India namely Brandix India Apparel City one of the revolutionary development in the industry. the

B. MAS Holdings
Started in 1986 as a manufacturer of intimate apparels have now grown in to a 700 million US$ business in operation with 34 facilities across 5 countries. It is also employing around 44,000 people. MAS also have got a market share of 20%

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C. Hidaramani Industries Limited

It has over 15 factories in Sri Lanka and employees over 25000 people and generate 500 million US$ holding a share of around 13%

4. Competitor Analysis

Competitors

Growth Rate

Financial Stability Very High

Turnover

Market Share

Comments

Brandix

High

Very High

Very High

Since the company is well over from Maliban stats they are so called threat and a major competitor.

MAS Hidaramani

High High

Very High Very High

Very High Very High

Very High Very High

Same As Above Same As Above

Considering above Maliban is operating in a very competitive market. Some of the competitors have got joint ventures with international manufacturers.

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5. Porters five forces model for Maliban (Porters, 1998)

The five forces are environmental forces that impact on a companys ability to compete in a given market ( Davey,C.,Millard,S. Market and Strategy Lecture notes 2011) The aim of this analysis to evaluate the principal competencies in the apparel exports market for maliban and the importance of each category as shown in figure 3

Figure 3

Source: Strategy4u.com

Below table 1 discuss porters model applied to Maliban

Table 1 5 forces Threat of new entrants

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Impact to Maliban Operating Environment

Government support to enter in to the market been a developing country

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Tax free benefit if it is started under BOI ( board of investment ) in Sri Lanka Investors are keen to start business in Sri Lanka due to potential Most of the basic resources will be provided by the government or can be sourced at low prices to set up a new business

Determinants of supplier power

Big suppliers in China is a threat to Maliban in terms of the price they offer to buyer For some new designs raw material suppliers demand high prices as raw material is not freely available Some raw material suppliers are nominated by the Buyer when placing the order. Hence maliban will have less bargain power with those suppliers.

Determinants of Buyer power

High bargain power of buyers due to Asia region giants low cost products, specially due to Chinese suppliers High bargain power of buyers due to their competitors Some economic conditions as recession in Europe also lead to huge price cuts and less order placement by buyers. Some buyers demand price cuts because of their low profit margins Some buyers do backward integration and acquiring small factories.

Threat of substitute products Rivalry between existing firms

Clothing is a basic need of humans. So there is no substitute product for it.

The other three giants in this industry are a big threat. They are financially very sound hence can play for low margins to take the business

Small suppliers also have a competitive advantage to play in the market due to their less overhead. So can reduce price margins up to great extent.

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Some big companies in Sri Lanka are acquiring small

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companies to compete for the market share.

Big companies are also converting apparel manufacturing plants to green concept (conserve the environment) with a huge investment to attract buyers as they were given top priority. This is also a main threat to small players who cant make such upgrades.

6. Conclusion

Considering porters five forces the main competition maliban face with is the world apparel market growth in new regions like as in China. Still Sri Lanka is standing in a strong position in terms of the price, quality and reliability of the products made with ethical practices together with less delivery lead times.

Another challenge would be go green conserve environment practice with less carbon foot print. Modern factories are built to this concept and buyers are giving high preference to these. Upgrading old factories to comply with this concept is another challenge.

Growing economy high labour costs is another factor maliban is facing.

Last but not the least maliban will however confront with all these challenges been a successful business in Sri Lanka to prove that it is worth to carry the mark as a most preferred supplier and ethical manufacturer of world class garments.

Note: word count has been calculated excluding executive summary, conclusion, References and appendix.

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7. References
I. Gerry,J Et al (2011). Exploring Strategy. 9th ed. Essex: Pearson Education Limited. 771. II. Sri Lanka Apparel Exporters Association. (2012). Related News. Available: http://srilankaapparels.com/. Last accessed 10th Feb 2012. III. Sri Lanka Apparel. (2012). Welcome To Sri Lanka. Available: http://jaafsl.com/. Last accessed 09th Feb 2012. IV. Sri Lanka Apparel Sourcing Association. (2012). Projects. Available: http://www.garmentslanka.com/projects.html. Last accessed 09th Feb V. Lanka Business Online. (2012). Sri Lanka apparel industry shrugs off loss

of trade benefit. Available:

http://www.lankabusinessonline.com/fullstory.php?nid=1587564030. Last accessed 09th Feb 2012. VI. Jason Trennert (2004). New markets, new strategies. London: McGrawHill Professional. 192. VII. Gary Gereffi, Stacey Frederick. (2010). the Global Apparel Value Chain, Trade and the Crisis. Policy Research Working Paper. 5251 (1), 42. VIII. Rupa Dheerasinghe. (2010). Garment Industry in Sri Lanka Challenges, Prospects and Strategies1. CHALLENGES, PROSPECTS AND

STRATEGIES FOR THE GARMENT INDUSTRY IN SRI LANKA. 1 (1), 40.

8. Appendix

Table 1

Source: Global fashion apparel industry

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