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Case study: Arvind mills ltd.

Industry analysis
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Covers a Gamut of activities (Independent & Self-Reliant

industry) From production of raw materials like cotton, jute, silk and wool to providing high value-added products such as fabrics and garments Plays a key role in the economy Being labour intensive industry, it provides direct employment to around 38 million people and contributes 5% to GDP. Significant contributor to trade Accounts for eight per cent of global trade in textiles Poised for growth Exports are growing at 11.8 per cent estimated to grow at 15 to 18 per cent
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The industry is dominated by small scale players across the value

chain Raw materials Processing

Spinning Weaving/Knitting Garment Manufacture

Presence of capabilities across the entire value chain within the

country reduces lead time for production and cuts down the intermediate transportation time. Government Support Encouraging engineering colleges to offer courses in textile engineering, TUFS (Technology Upgradation Fund Scheme) for textile sector has been extended till 2011-12 . Revival of sick mills by National Textile Corporation. Encouraging public-private partnerships in textiles
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Growth rate of Domestic Textile Industry is 6-8% per

annum.
Growing domestic demand

Disposable income of consumers has been rising steadily in India


The consuming class is expected to constitute 80 per cent of the population by 2011
India has great advantage in Spinning Sector and has a presence

in all process of operation and value chain.

Indian Textile Industry is highly fragmented Industry that is lead

by several small-scale industries. Because of this, there is lack of Industry Leadership. These small companies do not have fiscal resources to invest in technological up-gradation that affect the quality, cost and distribution. This leads to inability to establish a world-class competitive player.
Though Industry has cheap and skilled manpower but they are

less productive.
Industry is unable to generate economies of scale, as a result, it

is tough to balance the demand and supply equation.


Inadequate Research & Development.
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Large Composite Textile/ Apparel/Madeups/Garment Manufacturers Arvind Mills Welspun Group Raymond Alok Industries Madura Garments Ahmedabad

Composite Units/ Fibres &Filaments manufacturers Ashima Group Reliance Industries Garden Silk Mills Mafatlal Industries

Ahmedabad is the leading manufacturer of cotton and blended textile. It is also one of the largest producer of denim in the world. Government has taken active steps to develop Apparel Park for overall growth of textile sector. Surat is the countrys strongest base for non cotton fabrics. 7

Surat

Fragmented industry Supportive policies Growing domestic and exports opportunities

The sector is competitive and likely to see increased investment from global players

Abundant supply of raw materials

Well established supplier base

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Competitive structure ( Fragmented) Lack of industry leadership Demand Condition (growing) No significant exit barriers

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Growing domestic and exports demand, buyers are large in

number. Wide range and variety of products Alternative suppliers Switching cost from one buyer to the other low buyer can integrate backwards and can have captive supply source.

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No significant threat

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Company Analysis
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Founded in 1931 by three brothers Kasturbhai, Narottambhai

and Chimanbhai Worlds third largest producer of Denim (annual capacity of 110 million meters) has export network of 70 countries worldwide. Concept of Renovision: In the mid 1980s the textile industry faced another major crisis. People, the world over, were shifting from synthetic to natural fabrics. Cottons were the largest growing segments. Many large composite mills lost their markets, and were on the verge of closure.
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The Arvind management coined a new word for its new strategy

Renovision i.e. a new way of looking at issues, of seeing more than the obvious and that became the corporate philosophy. Where conventional wisdom pointed to popular priced segments, Renovision pointed to high quality premium niches. Thus in 1987-88 Arvind entered the export market for two sections -Denim for leisure & fashion wear and high quality fabric for cotton shirting and trousers. has fixed out an aggressive strategy to verticalize its current operations by setting up world-scale garmenting facilities and offering a one-stop shop service, by offering garment packages to its international and domestic customers. Diversification and take over of failed firms and thus converting non-performing assets into productive national resources.
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CSF

are those strategic factors which are crucial for organizational success. When strategists consciously look for such factors and take them into consideration for strategic management, they are likely to be more successful while putting in relatively lesser effort.

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Probability of Impact High


Scale of operations, Brand strength and reach (For Apparels), Economic -

Impact on business Medium Low

High

Socio - Cultural, International

Medium

Integrated supply chain, Regulatory

Low

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ENVIRONMENTAL THREATS AND OPPORTUNITY PROFILE (ETOP)


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To see how organizations can comprehend the

environment in which they exist.


To identify the environment Classify the environment into specific

environment sectors.
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Market Environment Technological Environment

Supplier Environment
Economic Environment Regulatory Environment International Environment

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STATE OF TECHNOLOGY Mills with obsolete and old machinery. Spinning and weaving became two different split

operations ,disturbing the integrated plants. Spinning the capital intensive part was handled by the automatic mills Labor intensive component outsourced by textile companies.

SOURCES OF TECHNOLOGY International markets with remarkable,

sophisticated , electronically controlled textile machineries. The technology ensured good quality product with minimum labor input.
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TECHNOLOGICAL DEVELOPMENTS No developments in Indian Market.


REASON: Protected domestic market. Import of capital goods was controlled by rigid licensing and high import tariffs.

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IN INTERNATIONAL MARKET
Major technological developments: Development of sophisticated, electronically controlled textile machinery. Such machineries ensured good quality product with minimum labor inputs.

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Economic Stage of India: Textiles comprised 33% of India exports. Textile exports were to the tune of Rs29,000. India had the largest area under cotton cultivation i.e. 24% India had the lowest textile yield(12% of global production)

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Industrial policies High wage structure Poor I.R relations resulting into long strikes in Mumbai textile units. Government controlled inputs like power, coal, freight etc. High indirect taxes, excise duty.

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Macro economic view of India Mounting deficit in budget Balance of payment position was extremely difficult. Rupee is appreciating and thus exports are

being discouraged in cotton industry. Government policy would always be favorable to exporters.

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Import of capital goods was controlled by rigid

licensing and high import tariffs. Government controlled inputs like power, coal, freight, etc. High indirect taxes, excise duty.

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DOMESTIC MARKET ENVIRONMENT Protected domestic market The products of Arvind Mills were not up to the international standards The lower end market was dominated by power looms. The upper end market was dominated by major mills and spinning mills set up as 100% EOUs.

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CONSUMER DEMAND The consumer in the household sector demanded better quality fabric.
TRADE CHANNELS The trade channel comprised of agents and wholesalers which were very slow to change and continued to demand conventional products. These trade channels held a very powerful position in the textile distribution.
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EMERGING COMPETITIVE DOMESTIC

MARKETS
The power loom sector had less entry and exit barriers .

Very less capital investment Labor was unorganized and poor.

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Worlds largest democracy with 2nd largest Population Variety of


Economic levels

Social status
Cultural Group

Co-existence of poor and middle class

Contd...

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Consumers tastes and preferences are transforming to

western Larger portion is young population so denim is favorable Increasing shopping habits specially of women

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Textile is an International or Global Industry The Company has got Global opportunities Mergers and Acquisitions abroad Third largest denim producer in the world Low cost of domestically produced cotton Low cost of labour and weak currency

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International textile industry had advanced technologies

in use.

Produced high quality product. Certain companies like Dominion Textiles and Mitsubishi

entered into private branding practice.

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Environmental Sector Market

Nature of Impact

Impact of Each Factor a. Protected Domestic Market. b. Emerging competitive power loom sector. Indian textile market less advanced technology oriented. Rupee appreciation. Government controlled inputs, high taxes, controlled import of capital goods. Politics had no great role in the industry

Technological

Economical

Regulatory Political Socio - Cultural

2nd largest population. Transforming consumer preference and shopping habits.


Low cost of labor. Low cost of production Unexplored global textile markets.

International

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Major changes in financial strategy from 1987-88 For modernization Company went for large borrowings in 1988 Again in 1991 the Company changed to equity financing Growth and potential of the company attracted foreign institutional

investors, e.g. Intl Finance Corp. invested Huge capital in Arvind ltd. Large fund mobilization through capital market Readiness of domestic investor to invest as well Received long term loan from ICICI

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Marketing capability factors could be segregated into

four basics categories:


Product Promotion Price

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Product
Unisex leisure/fashion fabric both for intl and domestic

mkt High quality fabric for mens formal shirts and bottom both for intl and domestic market Fashion fabric for women primarily for domestic women Readymade garments for men- shirts and jeans Wide range of textile products and brands
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Promotion
Creating awareness : An initial challenge Creating customer orientation

Focused on encouraging awareness of denim and high

premium garments Goal of developing long term trusting relationship with patients

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Price
lower prices in comparison to the competitors due to

the availability of low cost domestic cotton and labour.

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EMERGING SHIFT OF INTERNATIONAL

GARMENT BUSINESS
Reason:

Low cost of domestically produced cotton. Low cost of labor Weak currency

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Production System Operation and Control System R & D System

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The capacity of Arvind Mills was 70 million meters/annum.

Features of Production:
Automatic spreading and cutting. Automatic patterns sewing machine for cuffs and collars. Automatic collar and cuff making machine. Automated conveyor system in finishing areas to minimize

handling of finishing garments. Arvind Mills works on technologies such as Open-end Spinning, Foam Finishing, Mercerizing, Slasher-dyeing, Rope-dyeing, AirJet, Projectile and Wet Finishing. To further meet customer needs, Arvind Mills has also introduced a new dyeing and processing method for denims.
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Arvind Mills had been put up in Technical Collaboration

with Tsudakoma Airjet Looms. The company has followed a disciplined strategy of improved product and customer mix Increased capacity utilization Control on sourcing of cotton and other raw materials to reduce procurement costs.

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Arvind Mills has a strong Research and Development focus

on process improvement, cost reduction and new product development. Introduced brand Ruf & Tuf with the concept of ready to stitch jeans. Also its Newport brand was made available at low price. Arvind Mills produce more than 50 varieties of denim for international customers.

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Arvind Mills resourced management talent from diverse

backgrounds, so that they come with a fresh perspective and no preconceived mindset. The delayerisation and flattening of the management structure had been carried out to enable employees get early substantive responsibility. Recruitment from premier management and technological institutes were done.

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Advanced Production Management software and Advanced

Industrial Engineering software. Each sewing machine would have a data center which would be used to record critical parameters like Online production, machine stoppages due to problems in sewing, problems in machines etc. The data from these data centers would be routed to Central Console Station where a team of production engineers would be monitoring each of the lines. This system ensures a strong control over production and ensures a quick turn around apart from a high quality level. 49

Inspiring lifestyle solutions Successful takeover of failed firms & rejuvenating

them with a new purpose Conversion of non performing assets into productive resources Establishing Arvind Mills as global company

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Capability factor Financial capability Marketing capability Operational capability Personnel capability

Nature of Impact

Impact of each factor Readiness of domestic and international investors to invest and good financial performance Good quality, good packaging, low price Constant innovation & improvement in processing

Growth opportunities for employees, handling responsibility & free access to senior officials

Information Management System General Management

Usage of Advanced Softwares for recording minutest operations, huge databank Well thought out strategy & successful takeover of failed firms & hence establishing Arvind Mills as a Global Company
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